The Caisse de dépôt et Placement ahead of its Canadian competitors

A reader, André S., told me a good one!

To paraphrase Charles Emond, CEO of Caisse de depot et Placement du Québec, it’s the story of a man who, after a hard night at the casino, said to his wife, “Honey, I won $1,100 last night and instead only lost $3,360 out of $4,460 if I had played my benchmark strategy. »

With the Caisse, all you have to do is add seven zeros to the previous numbers to get the same result. In fact, the big head of the Caisse de depot boasted this week of reporting $11 billion in “added value” in the first half of the year.

How did he manage this financial tour de force? By “losing” its benchmark portfolio with its half-year return of -7.9%, just $33.6 billion, or $11 billion less than the -10.5% paper loss.

More positively, it’s… hard to beat!


It must be said that Charles Emond and his portfolio managers have nevertheless managed to limit the damage within the framework of the sharp correction that hit the financial markets in the first half of the year, both on the stock market and on the bond market for negotiable shackles.

The Caisse returned -7.9%. It’s certainly a modest underperformance if we compare this drop to the drop in equity markets, ie -29.2% for the NASDAQ; -20% for the S&P 500; -9.9% for the Toronto S&P/TSX.

The same is true when comparing the Caisse’s half-year underperformance to that of bond indices: -22.1% for long-dated bonds; -16.7% for Quebec bonds; -12.2% for universal bonds; -14.0% for corporate bonds.

With a six-month return of -7.9%, the Caisse is two percentage points above the returns of the most diversified mutual funds in equities and bonds traded on the public financial markets.

It is thanks to the “performance” of its private investments, whether in companies, infrastructure, real estate, etc., that the Caisse has managed to outperform the diversified public funds in this way.


If, on the other hand, one compares the half-year return of the Caisse of -7.9% with that of its competitors, i.e. other large pension funds or sovereign wealth funds, modesty is required of the Caisse’s managers.

At CPP Investments, managers of the Canada Pension Plan Fund, the gargantuan portfolio has shrunk by around 7.1% in the first six months of 2022.

Managers of Ontario’s large municipal employee pension fund, OMERS, ended the period down a tiny 0.4%.

Meanwhile, the Ontario Teachers’ Pension Plan (Teachers’) managed to post an incredible positive return of 1.2% over the same difficult semester.


Given the high proportion of private investments in large pension funds and sovereign wealth funds, comparisons are likely to be flawed as the criteria used to assess the market value of these investments are likely to vary from fund to fund.

Take our Caisse de depot. The larger the Caisse’s portfolio, the more it invests in private investments. As these private placements become more prominent in the Caisse’s portfolio, it becomes more difficult to compare the Caisse’s performance.

It should be noted that the fair value calculation of private investments classified as Level 3 is “conducted using valuation techniques, the significant inputs of which are unobservable” as stated in Caisse’s Investment Valuation Policy. However, it adds: “This level includes financial instruments whose valuation is based on the price observed for similar financial instruments, adjusted significantly to reflect the specific characteristics of the financial instrument being valued and the available market data. »

As of June 30, Level 3 private investments totaled $196 billion, or half of the Caisse’s net worth. This category includes real estate, real estate debt, private placements, infrastructure, fixed income, unlisted equities, and corporate debt.

For comparison, the fair value calculation of Level 1 investments (such as publicly traded shares and marketable bonds) is based on observable prices in active markets. Net worth as of June 30: $142.8 billion.

For their part, the calculation of the fair value of Level 2 investments is carried out either directly or indirectly “using valuation techniques whose significant inputs are observable”. Net Worth: $49.5 billion.

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