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Québec’s Caisse De Dépôt returns C$1.1bn from private equity portfolio

24 Feb 2012

Canadian pension fund The Caisse de dépôt et placement du Québec saw a 7.1 per cent return on its private equity portfolio in 2011, generating C$1.1bn.

The private equity portfolio’s return was considerably higher than that posted by equity market portfolios (-7.2 per cent return) and limited reductions in value in the equity category to C$3.3bn.

The outperformance was primarily attributed to buy-out activities. This portfolio had annual returns of 10.8 per cent in 2009 and 26.7 per cent in 2010.

The Caisse’s weighted average return was four per cent, with net assets of C$159bn, compared to C$151.7bn as at 31 December 2010. This growth is due to net investment results of C$5.7bn, plus $1.5bn in net deposits, it said.

The Caisse’s return was four per cent, slightly below its benchmark portfolio of 4.2 per cent. Thirteen of the 17 specialiszed portfolios posted positive results.

The period was impacted by the European sovereign debt crisis which, combined with fears of a slowdown in emerging markets, heavily affected markets, it said. Under these excessively volatile market conditions, the Caisse acted quickly by reducing its exposure to equity between the end of June and the end of September and by maintaining a high level of cash.

It was also able to capitalise on its investments in fixed income, private equity, real estate and infrastructure and generate a positive return for its depositors, according to Michael Sabia, the Caisse’s president and CEO.

“Since 2009, we have worked on improving our ability to face turbulent markets. We have simplified our investment strategies, reduced our leverage and developed new tools, thereby enhancing our efficiency and agility. In 2011, these efforts served us well. Despite difficult conditions, we were able to adjust our asset allocation to protect our depositors’ capital and notably grow our assets. After three years of hard work, the Caisse’s net assets now stand at C$159bn, C$3.6bn above the level reached prior to the 2008 crisis.”

Since December 2008, depositors’ net assets grew by C$38.9bn. This growth is attributable to net investment results of C$35.2bn, plus net deposits of C$3.6bn. For 2009, 2010 and 2011, the Caisse’s annualised return was 9.1 per cent.

“We still have substantial ground to cover, however our performance over the last three years shows that the changes we have implemented are bearing fruit with respect to returns, operational efficiency and risk reduction,” added Sabia.

The Caisse’s assets in Québec now exceed C$41bn. It has proved C$60m to 58 SMEs located in in the region, through the Fonds Capital croissance PME, a partnership between the Caisse and Desjardins Group.

Completed new investments during the year included C$1.6bn in the infrastructure sector, including two major projects in the oil and gas sector, namely €360m in Fluxys, in Belgium, and $850m in Colonial Pipeline, the largest pipeline network in the US.

“The past year was a real roller coaster ride, and market conditions considerably deteriorated in the second half of the year,” said Roland Lescure, the Caisse’s executive vice president and CIO. “Through our efforts and the tools we developed over the last three years, we were able to act quickly by reducing our exposure to equity markets in the third quarter amidst declining markets, and by subsequently rebuilding our position as systemic risks decreased,” he added.

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