The Caisse de dépôt et placement du Québec generated a return of 7.2% in 2023, a result which was dragged down by the underperformance of the institution’s significant private placement portfolio.
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“The year 2023 was marked by high volatility in the bond markets and a historic concentration of gains in a handful of American technology stocks,” said the CEO of the Caisse, Charles Emond, on Thursday.
The institution’s return was slightly lower than that of 7.3% posted by the reference portfolio that it uses to measure its performance.
Over 5 years and 10 years, the Fund’s annualized returns amount to 6.4% and 7.4% respectively.
The Caisse ended the year with assets of $434.3 billion, up $32 billion in one year.
“Caisse de dépôt et placement du Québec”
In the fixed income sector (bonds and loans), the institution achieved a return of 8.1%, higher than that of 7.7% of its benchmark index.
On the stock markets, the institution produced a return of 17.7%, compared to 17.4% for its index.
The Magnificent Seven
The Caisse achieved this respectable performance while being underweight in the seven American stocks that propelled the stock markets last year. These are the “Magnificent Seven”: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. As of December 31, the institution held approximately $9.5 billion in these companies.
“Caisse de dépôt et placement du Québec”
“We have some, Magnificient Seven, but still less than the market [les indices], specified Mr. Emond. If we wanted as much as the market, [il faudrait y consacrer] $17 billion. […] Would we do that? Never. We want to have it intelligently. Do we buy all seven blindly? No, we buy some more than others.”
The Fund’s investments in private placements (external funds and shares of unlisted companies) provided a meager return of 1%, far behind the reference portfolio, which appreciated by 10.5%.
More indebted than the average, companies included in private placements suffered more from the rise in rates, explained Charles Emond.
“If you have more leverage [endettement] and rates go up, even if your profits go up, the rise in interest rates will eat into that,” he said.
Private placements represent 18.4% of the Fund’s assets, a much higher percentage than a few years ago. Over 10 years, the annualized return of this portfolio still remains interesting, reaching 13.4%, compared to 10.6% for the index.
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Still difficult in real estate
It is in the real estate sector that the institution obtained its worst return in 2023, i.e. -6.5%, compared to -10% for the index. A few weeks ago, the Caisse announced the repatriation of its real estate subsidiaries, Otéra Capital and Ivanhoé Cambridge, within it, while the CEO of the latter, Nathalie Palladitcheff, announced her departure.
In the infrastructure sector, the institution generated a return of 9.6%, well above that of 0.3% posted by its reference portfolio.
Note that the Fund’s management fees jumped in 2023, standing at 0.59%, compared to 0.48% in 2022. The situation is explained by the increase in performance fees paid to external fund managers.
The Fund in 2023
- +7.2% Overall performance
- +8.1% Fixed income
- +17.7% Stock Markets
- +1.0% Private placements
- +9.6% Infrastructure
- -6.2% Real estate
- $434 billion (as of December 31) Total assets
- $88 billion (20%) Active in Quebec