The Caisse de dépôt et placement du Québec comments on the impact of the financial crisis on its operations

The Caisse de dépôt et placement du Québec commented today on the impact of the global financial crisis on its operations.

Like all institutional investors, the Caisse must adjust its strategies to cope with a crisis whose scope and effects are still uncertain. “This uncertainty has prompted the Caisse to manage with strategies that emphasize caution, preservation of capital and risk reduction,” stated Richard Guay, President and Chief Executive Officer of the Caisse.

The Caisse stated that it had sufficient liquidities to fulfill all its commitments to its depositors and business partners. It also pointed out that deposits exceeded withdrawals and would continue to do so for many years.

The salient feature of the crisis is the extreme volatility of the stock markets, whose values are fluctuating significantly over short periods. On some days, the variations on the stock markets exceed those normally seen over a full year or even two years. In such a context, it would be premature to estimate a return for the current year.

Historically, periods of extreme volatility have always gradually come to an end. The Caisse would like to point out that, around the world, central banks and governments are taking many concerted initiatives to resolve the crisis. Sooner or later they will have their full positive effect.

As at December 31, 2007, the Caisse’s net assets were allocated as follows: 36.3% in the portfolios of the Equity Markets group, 29.5% in the portfolios of the Fixed Income and Currencies group and 35.1% in other investments, mainly private equity and real estate. The proportion of investments in equity markets generally ranges from 40% to 60% in the industry.

The stock market decline has increased the weighting of all the other asset classes. To avoid accentuating this imbalance, the Caisse decided early in October 2008 to subject its private equity and real estate operations to a new approval process and to manage new investments in these areas with greater parsimony.

“We will come through this crisis as we have come through the other crises that have occurred in the history of the Caisse,” Mr. Guay stated, recalling that, after a major crisis in 2002, depositors’ net assets doubled from $77.7 billion to $155.4 billion, as a result of $63.1 billion of returns and $14.6 billion of net deposits.

The Caisse would like to reiterate that its long-term target returns take into account the probability of negative results one year out of four or five. The Caisse’s average annual return for the past five years is 12.4%. Its long-term target return is about 7%.

Lastly, Mr. Guay stated that the Caisse would, as usual, report on its annual returns in February.

About the Caisse de dépôt et placement du Québec
The Caisse de dépôt et placement du Québec is a financial institution that manages funds primarily for public and private pension and insurance plans. As at December 31, 2007, it held $155.4 billion of net assets. One of the leading institutional fund managers in Canada, the Caisse invests in the main financial markets as well as in private equity and real estate. For more information: www.cdpq.com.