Operating expenses for the Caisse de dépôt et placement du Québec compare favourably with those of its peers

The Caisse de dépôt et placement du Québec reacted strongly today to an article published in La Presse implying that the Caisse’s operating expenses are higher than those of some of its peers.

Contrary to the claims made in the article (entitled “La Caisse de dépôt est beaucoup plus dodue que ses pairs” or, roughly translated, “The Caisse de depot is a much fatter cat than its peers”), the Caisse’s operating expenses compare favourably with those of the Ontario Teachers’ Pension Plan (Teachers’) and the Public Sector Pension Investment Board (PSP). The article asserts that to generate returns similar to those of Teachers’ and PSP, the Caisse employs four times as many people. This statement is false and La Presse made no attempt to check it with the Caisse’s media relations department prior to publication.

According to six objective and widely accepted measures, the Caisse’s operating expenses compare favourably with those of its Canadian peers.

1. The 2006 annual reports of the three organizations indicate that the Caisse employs 880 people, compared to 614 for Teachers’ and 182 for PSP.

2. In terms of net assets per employee at the end of 2006, the results are similar for the Caisse and Teachers’:

• Caisse:  880 employees and $143.5 billion in net assets, i.e., $163.1 million per employee
• Teachers’:  614 employees and $106 billion in net assets, i.e., $172.6 million per employee
• PSP: 182 employees and $35 billion in net assets, i.e., $192.3 million per employee.

However, on the basis of total assets per employee, the Caisse comes out on top:

• Caisse: 880 employees and $207.9 billion in total assets, i.e., $236.3 million per employee
• Teachers’: 614 employees and $142.7 billion in total assets, i.e., $232.4 million per employee
• PSP: 182 employees and $37.7 billion in total assets, i.e., $207.1 million per employee.

3. In addition, the average salary per employee is higher at Teachers’ and PSP than it is at the Caisse:

• Caisse:  880 employees and $116 million, i.e., $131,818 per employee
• Teachers’: 614 employees and $140.9 million, i.e., $229,479 per employee
• PSP: 182 employees and $28.4 million, i.e., $156,044 per employee.

4. The Caisse maintains that the best way to evaluate operating expenses is in terms of average net assets. In this respect, the Caisse’s operating expenses were lower than those of Teachers’ and PSP:

• Caisse: 20 cents per $100 of average net assets
• Teachers’: 22 cents per $100 of average net assets
• PSP: 34 cents per $100 of average net assets.

5.  Comparing added value to operating expenses is a flawed way to measure performance, in that the indexes used to establish added value vary from one organization to the next. The Caisse’s indexes on the whole outperformed the indexes for Teachers’ and PSP in 2006, generating a return of 12.7% compared to 9.4% and 10.1%, respectively. Moreover, contrary to what was written by Hélène Baril in the article, added value does not represent the Caisse’s net profit. In fact, net profit corresponds to the result of investment operations expressed as a dollar amount.

6. Comparing operating expenses to net profit, the Caisse’s expenses are slightly under those of Teachers’:

• Caisse: $262 million in operating expenses and net investment results of $17.8 billion, i.e., 1.5 cents for each dollar.
• Teachers’: $220 million in operating expenses and net investment results of $12.1 billion, i.e., 1.8 cents for each dollar.
• PSP: $103 million in operating expenses and net investment results of $3.4 billion, i.e., 3 cents for each dollar.

In her article, Ms. Baril states that operating expenses and the number of employees have followed the same growth curve at the Caisse, i.e., an average annual increase of 4.5% from 2002 to 2006. However, she neglects to mention that there has also been a corresponding and very real gain in efficiency, with net assets growing by just over 16% on average every year during this period.

Lastly, it is difficult to compare operating expenses of different fund managers with any degree of accuracy, as this figure is contingent on the percentage of assets managed externally, the scope of activities not related to the management of net assets, the different asset allocation approaches used and the scope of strategies where no capital is involved.

In light of all of this information, the Caisse firmly believes that it compares favourably with its counterparts on the basis of all recognized measures used to evaluate performance and operating charges.

The Caisse also condemns the sensational editorial treatment of this story, in terms of the position and amount of space the article was given in La Presse as well as the tone and vocabulary used, such as the word “bombe” (“bomb”) that appears on the front page of the business insert to describe Ms. Baril’s article.

As for the newspaper’s claim that “la Caisse a toujours été d’une discrétion suspecte quant au nombre de ses employés” (“the Caisse has been always suspiciously secretive about how may people it employs”), this is completely unsubstantiated, as the Caisse publishes this figure every year in its annual report.