Caisse portfolio: 33 billion evaporated

The Caisse de Depot et Placement du Québec (CDPQ) has finally written off its roughly $200 million investment in Celsius Network, a turnip in the cryptocurrency sector.

BOOF! This is part of the whopping $33.6 billion lost by the Caisse de Depot et Placement in the first half of 2022, we agree on that on paper, following the sharp correction in the financial markets.

To fully “estimate” this immense “loss on paper,” you need to know that it is barely $6 billion short of the gargantuan $39.8 billion loss that the Caisse de Depot suffered in 2008 due to Canada’s securities crisis and American listed subprime mortgages.

However, since everything is relative, it should be noted that the current half-year loss of $33.6 billion represents a mere 7.9% drop given the size of the Caisse de dépôt’s assets, which were $420 billion by the end of December 2021

In 2008, it lost nearly $40 billion, down 25% from its net worth of $155 billion at the end of 2007.

Self Congratulations Session

The Caisse even found a way to congratulate itself by commenting on yesterday’s half-year loss of nearly $34 billion and 7.9%.

“During the worst half-year for the equity and bond markets in 50 years, the CDPQ posted an average six-month return of -7.9%, well above its benchmark portfolio, which is at -10.5%,” it says in a press release further the results of the fund. The five-year and ten-year annualized returns are also ahead of the benchmark portfolio at 6.1% and 8.3%, respectively. »

Uh yes! the Caisse de dépôt boasts that it posted a lower loss than “their” benchmark portfolio.

The Caisse’s grand boss, Charles Emond, added, praising the work of his team of portfolio managers: “Despite this turmoil, the evolution of our strategy initiated at the beginning of the pandemic, the healthy diversification of our assets and the quality of execution of the teams have made it possible.” the overall portfolio to continue to outperform its benchmark portfolio. »

Here is the Caisse’s “performance” in the major asset classes compared to “their” benchmark indices, which you can find in brackets.

  • Fixed income securities: -13.1% (-15.1%)
  • Real wealth: +7.9% (+2.4%)
  • Equities: -10.6% (-11.9%)

In the documents presented to the media, the Caisse even boasts that it achieved no less than the “highest added value since 2010” in the first half of the year. The Caisse estimates this “added value” at $11 billion!

explanation of this boast. With a six-month return of -7.9%, the Caisse lost $33.6 billion. The Caisse has calculated that this is $11 billion less than the theoretical loss of $44.6 billion for the benchmark portfolio, which has a half-year return of -10.5%.

That’s where the alleged $11 billion “added value” came from that Charles Emond and his team of portfolio managers realized by reporting a negative return of 7.9% in the first half of 2022.

Important note: When portfolio managers like the Caisse forcefully remind you that they have outperformed their reference portfolios, it suggests that they deserve bonuses, even with a negative portfolio return.

RESTORATION

Since the beginning of the second half of the year, the stock markets have recovered significantly from the heavy stock market losses suffered up to June 30th.

The major North American indices (Dow Jones, S&P 500, Nasdaq, S&P/TSX) have been able to make up for more than half of their losses so far.

But from there to the end of the year to make up for the rest of the stock exchange losses incurred in the first half of the year, the cut is far from over the lips!

Inflationary pressure, rising interest rates, fears of a pronounced economic slowdown … remain omnipresent.

But rest assured Charles Emond and his portfolio managers need to beat ‘their’ benchmark indices by December 31st for the Caisse to add ‘value’ even if it ended the year in the red!

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