The Montreal company Investissements PSP, which manages the 264 billion in assets of the federal employees’ retirement plans, achieved a return of 7.2% for its fiscal year ended March 31, or 2.8 points more than the year former.
In its annual report published Monday, PSP management attributes this improved performance to “solid performance on the side of investments in listed stocks [en Bourse]infrastructure investments and debt securities.”
These good sectoral results also helped to mitigate the impact of lower returns obtained in its investments in fixed income securities and natural resource assets, as well as the still very negative return suffered in its real estate investment portfolio.
Despite these short-term pitfalls, PSP management argues that as a pension fund asset manager with “a long-term investment approach,” it continues to exceed its comparable return targets.
Thus, at the end of the 2024 financial year, PSP displays an annualized net return over five years of 7.9%, or 2.6 points more than its benchmark index of the overall portfolio at 5.3%.
“Continuity of good performance”
As for its annualized net return over 10 years, PSP announces it at 8.3%, or 1.6 points more than its overall portfolio benchmark of 6.7%.
“What satisfies me most in this annual report is the continuity of our good long-term performance with very strong results not only in public market assets [Bourse]but also with our investments in infrastructure and debt securities,” says Deborah K. Orida, President and CEO of PSP, in an interview with The Press.
When we consider these returns based on the risk associated with each of these asset categories, it demonstrates the depth of expertise developed at PSP, and which will continue to serve us well over the years.
Deborah K. Orida, President and CEO of PSP
Among the main segments of its assets under management, the two largest portfolios – fixed income (56.2 billion) and publicly traded equities (55.6 billion) – produced respective returns of 2.9%. and 17.5% during the financial year ended March 31.
Furthermore, PSP’s portfolios in private investments (40.4 billion), infrastructure investments (34.5 billion) and debt securities (26.2 billion) obtained respective returns of 12.1%, 14.3% and 14.2%.
However, these sectoral returns were obscured by the significant underperformance (-15.9%) of its real estate investment portfolio, which was recorded at 27.2 billion as of March 31.
“In all of our real estate investments, it is the office building sector that has been particularly difficult to manage, mainly due to the impact of changes in working habits. In return, our investments in multi-family residential real estate and industrial real estate were more resilient and efficient,” summarizes M.me Orida.
In its annual report published Monday, PSP management explains that “the negative revaluation of the portfolio [de placements immobiliers] over the past two years was primarily attributable to higher interest rates and structural changes” in the real estate industry.
In particular, underlines PSP, “the sector of [immeubles de] traditional offices, particularly in North America, continues to be largely affected by a deterioration in occupancy rates and [revenus de] rents. This reality reflects the uncertainty surrounding the hybrid working model and is amplified by the scarcity of available funding.”
PSP investments in brief (as of March 31, 2024)
- Activities: federal Crown corporation which manages the invested assets of the pension funds of federal employees (civil servants, armed forces and reserves, RCMP, etc.)
- Administrative headquarters: Montreal
- Net assets under management: 264.9 billion (+21 billion over one year)
- Net return over one year: 7.2%
- Annualized net return over 10 years: 8.3%
- Workforce: approximately 995 (Montreal, Ottawa, London, New York, Hong Kong)
- Total compensation of the five highest executives: 15.5 million (+5%)
Source: PSP 2024 annual report