Caisse de dépôt et placement du Québec (CDPQ) Achieves Historic Peak in Net Assets with 4.2% Return in 2023

2023-08-16 20:36:35

Caisse de dépôt senior management (from left to right) Nathalie Palladitcheff, President and Chief Executive Officer of Ivanhoé Cambridge, Charles Emond, President and Chief Executive Officer and Vincent Delisle, Senior Vice-President and Head of Liquid Markets . (Photo: Jade Trudelle)

The Caisse de dépôt et placement du Québec (CDPQ) recorded a return of 4.2% during the first six months of 2023, which enabled it to erase the losses incurred in 2022 and to see its net assets reach a historic peak.

As of June 30, the CDPQ’s net assets reached $424 billion, compared to $402 billion as of December 31 last. After an $18 billion decline in its net assets in 2022, the latter rebounded by $22 billion during the first six months of the year.

The performance of the “Quebecers’ woolen sock” compares to a return of 4.1% for its benchmark index.

On the equity markets, the Caisse’s performance reached 6.4% in the first half, compared to 9.1% for its benchmark index.

The management of the institution attributes this underperformance to its activities in private placements, which offered a return of 1.4%, well below that of 7.2% of the benchmark index. However, the institution maintains that over the past five years, this portion of the portfolio has generated a return of 15.4%, compared to 11.9% for the benchmark index.

On the stock market side, the performance reached 10.6% in the first half of the year, which was practically in line with the return of 10.7% of the benchmark index, despite a cautious exposure to seven large American technology stocks (Apple, Microsoft , Amazon, Alphabet, Nvidia, Netflix and Tesla) which “represent 80% of the performance of the flagship S&P 500 index” during the period.

Over five years, stock market returns averaged 7.1% each year, slightly below the benchmark’s 7.5%. The Caisse maintains that the difference is explained by “a more limited exposure of the portfolio to large technology stocks at the beginning of the period”. Management says it has increased its holdings in these securities in recent years, while “avoiding an exacerbated overconcentration like that observed in the markets”.

The Caisse’s Senior Vice-President and Head of Liquid Markets, Vincent Delisle, specifies that the institution has chosen to give itself greater leeway by exposing itself more to growth and technology, while doing it rigorously.

The bond sector is stabilizing

After a return of -14.9% in 2022, the fixed income securities portfolio stabilized during the first six months of 2023, generating a return of 3.9%, which is slightly higher than that of 3, 2% of the benchmark index. This performance was achieved thanks to the rise in interest rates.

Over five years, the monetary tightening that began in 2022 is still leaving traces, with an annualized return of 1.1%, while the benchmark index is at the point of equilibrium.

Vincent Delisle maintains that bond rates are more stable and that the entire portfolio of fixed-income securities is “carried by a yield to maturity of 6.5%, as well as by private credit (debt of emerging countries and credit to companies).

More difficult for private placements

In terms of private placements, the Caisse generated a return of only 1.4% in the first half, which is well below the benchmark index at 7.2%.

The president and CEO of the Caisse, Charles Emond, believes that this is not a surprising slowdown. “Portfolio companies are growing their profits, but rising interest rates are impacting funding and affecting the performance of some companies,” he says, hastening to add that the sector remains a growth engine. five-year performance with a return of 15.4% over five years, compared to 11.9% for its benchmark.

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