CDPQ posts an annualized return of 8.3% over five years and 6.1% over six months
La Caisse de dépôt et placement du Québec (CDPQ) today published an update of its performance as at June 30, 2019. Over five years, CDPQ generated an annualized return of 8.3%, representing net investment results of $103.8 billion and total assets of $326.7 billion. Over six months, the average return on depositors’ funds was 6.1%, generating net investment results of $18.4 billion.
“From a market perspective, we are living in roller coaster times. In the last six months of 2018, markets performed poorly on the expectation of continued monetary tightening from the U.S. Federal Reserve. In December 2018, the Fed changed its course in favour of more accommodating policies. In reaction, markets embarked on an impressive rally at the beginning of the year. This reflects the growing codependency between the U.S. central bank and capital markets – where each focuses on the other and the real economic conditions and profound structural changes occurring in the global economy are sometimes lost from sight,” said Michael Sabia, President and Chief Executive Officer of CDPQ.falsePleine largeurfalse
“In this environment, we continue to focus on resilience. It served us well when markets were crumbling last year, and it continues to produce results aligned with our depositors’ needs in the first half of 2019,” he added.falsePleine largeurfalse
In a highly competitive environment, CDPQ is pursuing its strategy of being selective in its investments and teaming up with partners that are recognized in targeted markets and sectors.
In Infrastructure, CDPQ conducted major transactions over the six-month period, including acquiring a 30% stake in Vertical Bridge, the largest private owner and manager of telecommunications infrastructure in the United States, and purchasing a natural gas transportation network in Brazil with Engie, a global energy leader. Jointly with DP World, it also acquired 45% stakes in two ports in Chile. In Private Equity, CDPQ invested in Allied Universal, a North American leader in security services, and acquired a 27% stake in Hilco Global, a financial services company with a global footprint. In Credit, CDPQ concluded a £150-million loan to Lightsource BP to finance a portfolio of over 100 solar energy projects across various countries and announced the creation of a new US$250-million credit platform in India alongside partner Edelweiss.
Ivanhoé Cambridge, in partnership with Oxford, acquired IDI Logistics, one of the largest logistics real estate developers and managers in the United States, in an investment totalling $4.6 billion. In the United Kingdom, Ivanhoé Cambridge invested in five logistics development projects through its PLP platform. With the ongoing objective of increasing its presence in new market segments, CDPQ’s real estate subsidiary also announced a US$1-billion commitment to Ark, the new real estate acquisition and development platform of The We Company, a global leader in creating collaborative environments. It also announced a partnership with ICAMAP to create ICAWOOD, a fund to develop low-carbon offices in the Greater Paris region.
In Québec, nearly $300 million was invested in new economy companies, including a new investment in AlayaCare, and additional investments in iNovia Capital, AddÉnergie, Metro Supply Chain Group and TrackTiK, partners of CDPQ for many years. During the six-month period, CDPQ also launched a $250-million fund to develop and commercialize artificial intelligence solutions, with a first investment in Dialogue, a technology platform for the health care industry.
As at June 30, 2019, depositors’ net assets totalled $326.7 billion, up $17.2 billion from $309.5 billion as at December 31, 2018. This growth is attributable to net investment results of $18.4 billion and net depositor withdrawals of $1.2 billion.
Returns by asset class and benchmark indexes
Over five years, CDPQ’s annualized return was 8.3%, higher than its benchmark index, which stood at 7.2%, and representing $12.6 billion in value added. Over the period, the annualized returns of CDPQ’s eight largest clients varied between 7.6% and 9.1%.
The pillars of CDPQ’s strategy implemented over the past few years have all contributed to the five-year performance. Increased exposure to global markets is profitable, as is the increase in real asset and credit investments. For example, the Infrastructure portfolio generated an annualized return of over 10% during the period. The absolute-return management strategy was also a strong contributor to the return and value added generated over the period, with Equity Markets portfolios alone adding over $6.5 billion in value. The Private Equity portfolio, with more than three quarters managed in-house rather than through funds, also provided a high 12% annualized return.
Over six months, CDPQ posted a 6.1% return compared to 7.5% for its benchmark portfolio. The difference is largely attributable to the Real Assets class, where the Real Estate and Infrastructure portfolios generated lower returns than their benchmark indexes. By definition, these are long-term assets whose performance cannot be measured over a six-month period. The Infrastructure portfolio performed as expected over the period, but it compared to a benchmark index comprised of over 200 stocks that benefit from booming public markets. In Real Estate, the six-month return reflects downside pressure on traditional sectors to the benefit of new market segments such as industrial and logistics real estate and mixed-use buildings. The Ivanhoé Cambridge portfolio continues its repositioning in that regard, as evidenced by multiple investments in recent years. For example, in two years, the industrial and logistics real estate sector went from 1% to 12% of the overall portfolio, with a medium-term goal of reaching 20%.
During the period, the Fixed Income portfolios delivered a solid 7.0% return, supported by the decrease in interest rates, narrowing of credit spreads and superior performance of credit in growth markets. The Equity Markets portfolio, with a strong focus on quality, performed as expected in a bull market – generating a sustained 9.7% return with a lower level of risk.
CDPQ’s annualized operating expenses stood at 23 cents per $100 of average net assets, a level which compares favourably with that of its industry and is unchanged from the same date last year.
ABOUT CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC
Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As at June 30, 2019, it held CAD 326.7 billion in net assets. As one of Canada’s leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt. For more information, visit cdpq.com, follow us on Twitter @LaCDPQ or consult our Facebook or LinkedIn pages.
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