Stock market slump, inflation, fears of an economic slowdown, war in Ukraine, the Caisse de depot et Placement du Québec (CPDQ) had to navigate stormy seas in “the worst semester in the markets in 50 years”, but the big boss Charles Emond wanted to calm.
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“We never want that, a negative return, that’s for sure, but we don’t control the environment we’re in. […] But the Caisse has a robust portfolio, we stand on solid foundations and so do our depositors,” he said in an interview with The newspaper.
The institute reports a return of -7.9%, which is above its benchmark index of -10.5%. We have to go back to the 2008 financial crisis to see such a pronounced drop in CDPQ, but the drop was much larger (-25%).
With that foray into the red, the institution’s assets are now $392 billion, down more than $28 billion since late 2021.
“It is sure that it is a large number, but these are not material losses, it is much better than the average of pension funds, which is -14% -15%,” underlined Mr. Emond.
A storm in the markets
However, these results for Quebecers are lower than a comparable Ontario teacher pension plan, Teachers, which showed a positive return of 1.2% for the first semester.
“With the teachers, the big difference is that they might have 9-10% stock market, while we and the other colleagues have 25-30%,” explained the executive.
The storm hit almost every sector, including the stock and bond markets, which experienced their first simultaneous correction since 1969.
“This atypical context, marked by instability, will continue for some time,” Mr Emond warned.
This severely shook the equity portfolio and caused the yield to plummet by 16%, but this is above its benchmark portfolio at -17.2%.
The situation could recover as stock markets have risen in recent weeks.
“July was the best month for equity markets in almost two years,” said Mr. Emond.
The bond market struggled with inflation and rapidly rising interest rates, impacting the bond portfolio (which includes bonds) with a negative return of 13.1%.
Other portfolios fared better, notably Private Placements (shares of unlisted companies) returning -2.4%, Real Estate (+10.2%) and Infrastructure (+5.8%).
The $200 million written off in Celsius
In addition, Mr. Emond has performed his mea culpa in the case of the Celsius Network collapse, in which he already believes he has lost everything.
“Don’t get me wrong, nobody at the Caisse is happy with the turn of events,” he said.
In July, the American company sought protection from its creditors. In papers filed in court in New York, she attributed her bankruptcy to “poor decisions” when investing. No fewer than 1.7 million private investors paid the price.
The CEO also acknowledged having made the decision to write off the Caisse’s investment in that company. This write-down is estimated at US$150 million (approximately CAD$200 million).
The CDPQ also said it is considering its appeals in the case.
A difficult start to the year for the Caisse
- Six-month return to June 30th: total -7.9%
- Stock Markets: -16.0%
- Steady income: -13.1%
- Private Placements: -2.4%
- Infrastructure: +5.6%
- Building: +10.2%