The Caisse de Depot et Placement du Québec has discreetly upgraded its performance bonus program over the past year to make it more generous, which has helped increase its spending, it noted The newspaper.
In its 2021 annual report, the Quebecers’ woolen stocking states that it has commissioned two companies to “calibrate” its pay to that of other employers in the financial sector.
“The results of this exercise allowed a realignment of the compensation or salary scales and the potential variable compensation, which should be realigned according to the studies on the positioning of compensation levels, in order to promote a better adaptation to the market,” specifies the cashier. .
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A jump of 13% in 2021
The bonuses provided helped increase the bonuses awarded by the Caisse by 13% per person in 2021. The average bonus reached more than $129,000 with a total payment of $187.9 million to the institution’s 1,454 employees.
Average total compensation now tops $350,000 per employee, up 16% from $303,000 five years ago.
“The Caisse is stealing the world from us”
With references like this, the Caisse finds it easier to poach professionals from the private sector.
“The Caisse steals us from the world. They never stole from anyone before. […] The situation has changed a lot,” he confided protocol a well-informed source at a major Canadian bank.
However, the Crown Corporation refused to disclose this protocol the extent of the increase in targets used to set bonuses. These targets are generally set as a percentage of base salary.
“The Caisse operates in a very competitive environment in which key players include other Canadian and overseas pension funds, mutual funds, brokerage firms and financial institutions. Our competitors do not disclose the performance bonus targets awarded to their employees,” wrote Claude Mikhail, the person responsible for access to information, in response to a request from the company protocol.
“If the fund released more accurate data […]it would expose itself to the recruitment of its best talent and likely suffer serious harm, to the detriment of its depositors in particular and the Quebec community in general,” Mr. Mikhail added.
More “aggressive” methods
“Even before the pandemic, jobs are much easier to find for our graduates than it used to be. And the recruitment methods of big institutions like the Caisse de depot and the big banks are much more aggressive,” said Jean-Philippe Tarte, Lecturer in Finance at HEC Montreal.
The Caisse is not the only one to have increased its premiums. Investissement Québec did the same last year, notably increasing certain target bonuses from 7% to 9% of base salary. For executive vice presidents, bonuses can be as high as 52.5% of salary.
In 2021-22, IQ’s average per-employee compensation reached nearly $138,000, up 9.9% year-on-year.
Caisse premiums in 2021
- Average premium: $129,230
- Average salary: $350,757
- Total awards: $188 million
- Total Compensation Paid: $510 million
Spending increased nearly 35%
The operating costs of the Caisse de dépôt et placement have exploded by almost 35% in the first six months of 2022 compared to the same period of 2021, reinforcing a trend observed for several years.
Those expenses, which include employee benefits, IT and professional services, and rent, totaled $433 million in the first half of 2022, according to the institution’s most recent financial statements.
Compared to the second half of 2021, the increase reached 9.3%.
Robert Pouliot, lecturer at UQAM and specialist in finance, deplores this “overspending” which undermines the Caisse’s performance.
“Every basis point counts in the performance of a portfolio,” he recalls.
However, the Caisse ensures that the relative weight of all its expenses, including external management fees and transaction costs, will decrease in 2022 compared to the previous year. In 2021, the Caisse’s total expenses exceeded US$2 billion, almost half of which was accounted for by fees paid to external managers.
“The CDPQ controls its costs tightly. We manage them as efficiently as possible to achieve optimal returns for our depositors,” commented a spokeswoman for the institution, Kate Monfette.
The Caisse expects its expenses to represent 0.52% of its average net assets in 2022, down from 0.57% in 2021.
In comparison, spending on the Ontario Teachers’ Pension Plan (teachers) accounted for 0.91% of its average net worth in 2021.
For the Canada Pension Plan Investment Board (CPPIB), fees for the fiscal year ended March 30 amounted to just over 1% of average net assets.
Note that financial advisors generally charge fees of around 2% of an individual’s assets under management.
Most importantly, however, are the returns, which are calculated after all fees. Over five years, the Caisse has posted an annualized return of 6.1%, compared to 7.9% for teachers and 8.7% for CPPIB.