The Caisse de dépôt et placement du Québec generated a return of 13.5% for its 2021 fiscal year, its best annual performance since 2010. This good result allows it to surpass the return of its benchmark index for the past year, as well as its annualized return for the last five years.
In total, the fund that we call Quebecers’ woolen sock added $55 billion to its net assets during the twelve months ended December 31. Since 2016, the value of the Caisse’s assets has increased from $271 billion to $420 billion, indicates its annual report published Thursday morning.
“All of our portfolios delivered the goods,” said Charles Emond, President and CEO of the CDPQ, at a press conference. “Infrastructure and private equity have posted exceptional performances, the stock markets have been able to benefit from the evolution of the portfolio, the repositioning in real estate is giving results, and we have done well in fixed income in the face of a sharp rise rates. »
The stock market pulls the Caisse
A fairly predictable result, it was the Caisse’s stock market investments that generated the bulk of its gains in 2021, at $40.5 billion. Their return of 24.6% over the year is higher than the index set by Caisse managers (22%) even though it is two percentage points lower than the S&P 500, a benchmark index of the New York Stock Exchange (26.6%). During the last months of 2021, the Caisse refocused its stock market strategy to focus more on technology stocks such as those of the American companies Apple and Tesla.
The Quebec fund also invested more heavily in telecommunications. These new engagements paid off big. Tesla’s stock value nearly doubled in 2021. Apple’s rose 35%. The Caisse remains a victim of a FOMO effect in this sector for having delayed investing more actively in it. Tech stocks saw their strongest growth in 2019 and 2020. In 2020 alone the value of the Nasdaq index jumped more than 42%.
Another slight false note on the Caisse’s annual balance sheet: the value of its fixed-income investments fell by 0.6% in 2021. The economic context makes this type of investment very unattractive at the present time. As proof, the comparison scale used by the Caisse in this segment experienced a slightly more pronounced decline, to 1.2%.
Residential rather than commercial
One of the main changes made to the Caisse’s investment strategy is to diversify its real estate assets in order to distance it a little further from shopping centers and office buildings. The pandemic has greatly reduced the value of this type of building where the Caisse, through its subsidiary Ivanhoé Cambridge, was very present until 2020.
The latter indicates that it has carried out more than 100 transactions aimed at breaking into sectors with more promising returns, such as residential and logistics. In all, Ivanhoé Cambridge carried out $18.8 billion in transactions in this sector. Added to this is the good performance of investments in renewable energies, integrated into the infrastructure sector.
All of this put together, the real estate strategy seems to have averted the worst. The return on the Caisse’s real estate portfolio was 12.4% in 2021, allowing it to recover from the decline suffered in previous years. Over five years, the return on the Quebec fund’s real estate portfolio is now 1.5%.
2021 was therefore a good year for the Caisse. Given the composition of his portfolio as of December 31 and the evolution of the markets since the beginning of 2022, the current year may be much more difficult to get through, admits Charles Émond.
“We are facing factors that substantially complicate the business environment in 2022. The pandemic, the surge in inflation and the conflict between Russia and Ukraine. Great discipline in the execution of our strategy, rigor in the selection of investments and judicious diversification will be essential to enable us to continue to perform well in the years to come. »