In Quebec, criticizing the Caisse de depot is a national sport. It is accused of being politicized, of overpaying its leaders, of making bad investment decisions, of venturing outside its areas of expertise as for the REM, etc.
Posted at 10:40 p.m.
But at a time when a terrible war is unleashed, coupled with an unending pandemic, when misinformation and insecurity reign, it is good to remember how strong we have institutions, like the Caisse of deposit, which inspire confidence, which relativizes the criticisms.
Caisse de depot funds – our funds – now stand at $420 billion. That’s twice the Quebec government’s debt. As much as the production of the entire Quebec economy for one year. More than 40 times the total investment envisaged for the REM de l’Est1.
The Caisse, with the highest possible credit rating (AAA), is fully capable of weathering any economic storm, brought on by a virus, war or whatever. Its 2021 results, like its long-term results, reflect its relative good management.
Over 10 years, its average annual return is 9.6%, above its benchmark index (8.9%). And this year, it has been able to do significantly better, with a 13.5% return, than the index to which it is to be compared (10.7%).
The Caisse is not perfect, far from it, but our funds are managed by people of good faith, who take into account the demands and values of Quebecers in their decisions, such as the environment, local economic development, diversity, etc.
We are far from the Russian regime and its leader, Vladimir Putin, who falsely claims that Ukraine is participating in a genocide of Russian-speaking populations and that it has “nazified” itself.
With the illegal invasion of Ukraine, we understand better why, in recent years, cells associated with Russian power have sought to destabilize Western democracies, in particular the United States, why Russian cyberattacks and disinformation strategies have multiplied on social networks. The aim was to weaken opponents of Russian intentions.
And today, precisely, there are few strong leaders in the world to oppose Putin. The steadfast Angela Merkel is gone, replaced by an uncharismatic German leader. Joe Biden is perceived as old, not very energetic. Emmanuel Macron and Boris Johnson have mixed, even contested leaderships. We are far from Winston Churchill.
There is indeed Xi Jinping, from China, but the Middle Kingdom is seen more as an ally of Russia, or at least as an actor who will be careful not to intervene too much. China’s position in the face of the invasion is, moreover, quite restrained.
These hostilities 7,000 km from Montreal will have an impact on the local and global economy and, in turn, on the returns of the Caisse de dépôt, whose funds are invested around the world.
Russia and Ukraine are all in all minor players on the world economic chessboard, far from manufacturing China. Nevertheless, economists agree that the conflict could drive up the world price of energy and certain foodstuffs, notably food (see next screen).
This new pressure on prices, already rising sharply due to supply chain problems caused by COVID-19, will make it more difficult for central banks to raise interest rates.
And nothing is known yet about the duration of the conflict, its effects on the rest of the region and Putin’s intentions for the future.
According to an economic analysis by Desjardins Group, “if the Ukrainian conflict worsens, we can anticipate a further contraction of the European economy. […] In the United States and Canada, we could see a negative effect on consumption due to market volatility, additional inflationary risks and loss of consumer confidence.
According to Caisse CEO Charles Emond, the conflict is a tangible sign of changes in the global political order.
“We have been moving for a few years towards an extremely complex, volatile, uncertain, ambiguous geopolitical environment. It’s a kind of geopolitical recession, a shifting of tectonic plates. The economic consequences will be lasting, even beyond the conflict, and at the Caisse, we must position ourselves accordingly,” Charles Emond replied to my question.
In other words, the context encourages the Caisse to be even more prudent in its management of funds, to reduce its risks, which, inevitably, could have an impact on its returns.
A virus and now a war, misery. Who could have predicted that our societies and our economies would have been so battered in such a short time? You still have to consider yourself lucky to be on this side of the Atlantic. And we will have to keep our cool in the coming months.
Prediction game
A word about the competition Business Press with the members of the team, which I organize every year. The journalists of the section were to try to estimate, on Wednesday, the return that the Caisse de dépôt would obtain in 2021, which turned out to be 13.5%.
Of the 14 participants, expected returns ranged from 5% to 17.4%, with an average of 9.3%. Two winners came in tied, with a difference of 0.5 point with the Caisse’s performance, namely André Dubuc (13%) and… Francis Vailles (14%). For the skeptics, know that I had revealed to others my own forecast the night before…
1. Note that the assets of the Caisse de dépôt belong to the depositors and not to the Québec government. The depositors are, ultimately, government employees (teachers, nurses, civil servants, executives, etc.), via the RREGOP and the PPMP, as well as construction employees, as well as Retraite Québec (all workers in Québec) and other depositors (Generations Fund, Health and Safety Fund, etc.).