CDPQ posted a mid-year 2024 return of 4.2% over six months and 6.0% over five years

CDPQ today presented an update of its results as at June 30, 2024. Over six months, the weighted average return on its depositors’ funds was 4.2%, below its benchmark portfolio’s 4.6%. Over five years, the average annualized return was 6.0%, above its benchmark portfolio’s 5.3%, representing nearly $14 billion in value added. Over ten years, the average annualized return was 7.1%, also higher than its benchmark portfolio, which stood at 6.3%, producing over $26 billion in value added. As at June 30, 2024, CDPQ’s net assets totalled $452 billion.

“The first half of the year was characterized by different factors: strong stock market performance that continued to be linked to a historic level of concentration in a handful of tech stocks, the U.S. Federal Reserve’s deferral of many rate cuts that were anticipated at the beginning of the year and modest global economic growth,” said Charles Emond, President and Chief Executive Officer of CDPQ. “During this period, our diversified portfolio performed well overall and our depositors’ plans also remain in excellent financial health. Discipline is in order going forward, as the second half of the year has already seen its share of twists and volatility.”

Return highlights

Fixed Income: Rising long-term bond yields erase high current yield

In the first half of the year, long-term (10-year) Canadian and U.S. government bond yields rose by 40 and 49 basis points, respectively, whereas the markets expected significant easing from central banks at the beginning of the year that did not materialize. This is due to a U.S. economy that appeared resilient until more recently and inflation that slowed but remained above the long-term target. In this unfavourable environment for bonds, CDPQ recorded a return of -1.7% over six months, in line with its benchmark index. Fixed income portfolios provided a high current yield of 3.1% during this period, due to the premium on private credit activities. However, this performance did not offset the decrease in value resulting from the portfolio’s strong sensitivity to rates, which reflects the need to match depositors’ long-term liabilities.

Over five years, the asset class’s annualized return was 0%, above its index’s -0.9%. The class was still affected by the historic increase in rates starting in 2022. The impact was, however, offset by the good performance of all credit activities.

Real Assets

Infrastructure: Robust and sustained performance

The infrastructure portfolio’s solid performance over the years continued in the first half of this year. Over six months, the return was 5.3%, above its benchmark index’s 4.3%, driven notably by the transportation sector, particularly ports and highways, as well as the energy sector.

Over five years, the annualized return was 10.2%, against the index’s 4.5% return. The portfolio played an important role in limiting the impact of high inflation on the total portfolio, given the context of recent years. Well diversified, it benefited over the period from all sectors it is exposed to and, in particular, from favourable positioning in renewable energies and port assets, two priority sectors in infrastructure. We also note the strategic materializations carried out in recent years by the teams.

Real Estate: Challenging office conditions still affecting portfolio performance

The real estate industry’s challenges in recent years persisted in the first half of the year, in particular due to the difficulties of the office sector and the high interest rate environment that weighs on financing costs. In this demanding context, the portfolio posted a return of -3.6% over six months, compared with the index’s -0.9%. The logistics sector contributed positively to the return, but could not fully mitigate the fall in value in the office sector, especially in the United States.

Over five years, the portfolio’s annualized return was -0.6%, below the index’s 0.8% return. Since the portfolio’s repositioning toward sectors of the future such as logistics and residential in 2020, the gap between the returns of the portfolio and the index has narrowed.

Equities

Equity Markets: Solid performance in a context of historically concentrated gains

The strong growth of stocks related to artificial intelligence was the dominant theme in the first half of the year, propelling the main indexes to record levels. In this context, where earnings are concentrated in these few companies, the Equity Markets portfolio still managed to outperform its index with a more diversified return. Over six months, the portfolio posted a 13.6% return, above its index, which earned 13.2%. The positive difference stems from excellent stock selection by internal managers.

Over five years, the annualized return was 9.8%, compared with 10.5% for the index. The difference is mainly explained by the portfolio’s marked underweighting in major tech stocks at the beginning of the period.

Private Equity: Key sectors drive performance

In the first half of the year, the portfolio posted a return of 6.9%, resulting from the performance of companies in sectors such as consumer goods, industrials and finance. The index recorded a return of 9.6%, which reflects in part the significant weight of public markets in its composition.

Over five years, the portfolio’s annualized return was 14.3%, compared with 13.0% for the index. Among the reasons for the performance over the period is the good selection of direct investments in the technology, finance and consumer sectors.

Québec: An important contribution to economic vitality

In Québec, CDPQ’s teams have delivered numerous transactions and projects to stimulate the Québec economy in a sustainable way, including:

Support to grow companies

• An investment of $500 million to support National Bank’s acquisition of Canadian Western Bank
• Support for Nuvei, one of the most advanced technology providers in the global payments industry, in its transformation into a privately held company, bringing its value to over USD 6 billion
• An investment of $125 million in Levio, a leading consulting firm specialized in large-scale digital transformations, to support its North American expansion plan
• Support for Lemay, a leading architecture and design firm, whose growth projects CDPQ has been supporting for 10 years, for its acquisition of Fusion Énergie
• An equity stake in QSL International, a key maritime logistics player that is headquartered in Québec City 

Major real estate and infrastructure projects

• CDPQ Infra’s master plan, the Plan Circuit intégré de transport express (CITÉ), to improve mobility in the Communauté métropolitaine de Québec
• Start of dynamic testing for the Réseau express métropolitain (REM), in Greater Montréal, on a first segment of the Deux-Montagnes branch
• Recent proposal submission by the Cadence team led by CDPQ Infra as developer partner, as part of the procurement process for the High Frequency Rail (HFR) project between Québec City and Toronto
• Reopening of the 9th floor of the Centre Eaton de Montréal, a heritage site in the heart of the city

A more sustainable economy

• Financial backing for Norda Stelo, a renowned engineering firm present in more than 50 countries, for its acquisition of InnovExplo, creating a new force in the field of critical minerals that are essential to the energy transition
• Participation in a $136 million round of financing in FLO, a major leader in transportation electrification that CDPQ has supported for nearly a decade

Integration of real estate subsidiaries: An important milestone in the history of CDPQ

The first half of the year saw the implementation of a major project for CDPQ: the integration of its real estate subsidiaries, Ivanhoé Cambridge and Otéra Capital, to benefit from the full potential of a simplified organization and to generate efficiency gains. Note that this integration, which began in January, will be completed by the beginning of 2026 and will ultimately represent annual savings estimated at approximately $100 million through the synergies achieved.