Quebec pension supervisor hit by business actual property headwinds

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The Caisse de dépôt et placement du Québec posted a weighted common return of 9.4 per cent for the yr ended Dec. 31, beneath its benchmark portfolio’s 11.8 per cent return, with web belongings rising to $473 billion.

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The provincial pension and insurance coverage supervisor’s outcomes have been helped by buoyant fairness markets and the efficiency of know-how firms, however damage by challenges within the U.S. workplace section of the business actual property sector.

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However, the Caisse beat benchmark returns over 5 and 10 years, posting an annualized return of 6.2 per cent over 5 years in comparison with the benchmark of 5.9 per cent. Over 10 years, the return was 7.1 per cent, above the benchmark portfolio’s 6.5 per cent return.

Meanwhile, the bottom plan of the Québec Pension Plan, which represents the pensions of greater than six million Quebecers and is the biggest fund invested with CDPQ, posted a return of 11 per cent.

“While uncertainty is excessive, notably because of ongoing tariff negotiations, self-discipline and the sound diversification of our portfolio will stay key to delivering the long-term returns our depositors want,” mentioned Charles Emond, chief government of the Caisse.

“Their plans stay in wonderful monetary well being, and our outcomes for one, 5 and 10 years have made a major contribution, regardless of the turbulence.”

Emond mentioned the 2024 market atmosphere was characterised by the vitality of the U.S. economic system, rising long-term bond yields and a historic stage of focus in the principle inventory indexes boosted by know-how firms.

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“During this era, our efficiency was pushed by our fairness market, non-public fairness and infrastructure actions, however was affected by persistent headwinds in actual property, notably within the U.S. workplace sector,” he mentioned.

Emond mentioned the commerce and tariff threats coming from the U.S. are requiring the pension supervisor to arrange for plenty of situations in 2025.

“It’s laborious to foretell Mr. Trump,” he mentioned, including that many potential outcomes are being thought of, together with the likelihood inflation will rise once more and result in a possible pause on rate of interest cuts within the United States.

He added that the tariff uncertainty might weigh on firms’ funding initiatives.

The Caisse’s fairness market portfolio recorded a 25.5 per cent return for the yr, surpassing the benchmark index’s return of 24.1 per cent, partially because of elevated publicity to progress and tech shares propelled by advances in synthetic intelligence.

Meanwhile, after being affected by the excessive rate of interest atmosphere in 2023, the non-public fairness portfolio rebounded in 2024, producing a 17.2 per cent return. The enhance got here from sustained progress within the profitability of portfolio firms, notably within the industrials and shopper items sectors, the Caisse mentioned.

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The infrastructure portfolio posted a 9.5 per cent return, boosted by the efficiency of port and vitality belongings.

The actual property portfolio posted a -10.8 per cent one-year return, due largely to a powerful focus of workplace buildings in New York and Chicago, the 2 hardest-hit cities.

The logistics sector carried out higher than the workplace sector, regardless of a worldwide slowdown, as did the buying centres, the place funding groups have made strategic tendencies since 2020.

Over 5 years, the actual property portfolio’s annualized return was -2.2 per cent, beneath the index’s return of 0.7 per cent.

“The damaging efficiency is once more defined by the longstanding focus within the U.S. workplace sector and by overexposure to buying centres at first of the interval,” the Caisse mentioned. “However, the publicity to logistics, which has elevated over 5 years, was worthwhile throughout the interval.”

In a press release, the pension supervisor famous that its funding methods have to be tailored to fulfill the danger tolerance and funding insurance policies of 48 particular person plans and that outcomes throughout these plans differ in consequence. The total returns are a weighted common of those funds.

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“In 2024, there was a pronounced distinction between the returns of the 9 largest funds … reflecting variations of their asset allocation selections,” the pension supervisor mentioned.

“For one yr, the returns ranged from 6.7 per cent to 11.1 per cent.”

Over longer durations, the annualized returns diverse between 4.2 per cent and seven.3 per cent over 5 years, and between 5.7 per cent and eight.1 per cent over 10 years.

“The largest fund invested with CDPQ, the bottom plan of the Québec Pension Plan, administered by Retraite Québec, posted a return of 11.0 per cent for one yr, 7.3 per cent over 5 years and eight.1 per cent over 10 years,” the Caisse mentioned.

As at Dec. 31, 2024, its web belongings have been $142 billion, together with the extra plan.

• Email: bshecter@postmedia.com

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