CDPQ Assets Hit $308.3 Billion in First Half of 2018

Canada’s Caisse de dépôt et placement du Québec (CDPQ) is now worth C$308.3 billion (US $236.7 billion), returning 3.3% in the first half of 2018.

The pension plan for Canada’s public and para-public pension and insurance plans’ fixed income class returned 1.1%. Real assets, meaning infrastructure, and real estate produced 5%, and the equities portfolio returned 4% for the first half of the year.

So far, CDPQ’s gains are up C$9.8 billion from December 2017.

The fund attributed the mid-year’s fixed income returns to bonds and the current yield. One of its key deals in the period ended June 30 was a $300 million co-investment with Fonds de solidarite’s FTQ, an investment firm, in renewable energy company Boralex. The joint venture was funded via an unsecured subordinated loan. CDPQ has invested $170 million under the deal so far.

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CDPQ increased its renewable energy assets, boosting its stake in Invenergy Renewables and Azure Power Global. The pension plan’s infrastructure subsidiary, CDPQ Infra, also finished the planning phase of the Réseau express métropolitain’s development in the spring. Construction on this railway, which will serve the Montreal area, will soon commence. La Caisse has invested $2.95 billion in that project so far.

The fund’s real estate subsidiary, Ivanhoé Cambridge, added to its industrial and logistics investments due to e-commerce’s growing popularity. It also announced plans to redevelop two of its shopping malls, the Eaton Centre and Laurier Québec.

As for most institutional investors, a low point was the stock market’s first quarter selloff, but that didn’t stunt the pension fund’s growth by much, as global equity reaped one of its best six-month returns to date, and the highest in five years at 13%. Growth markets, however, suffered due to the selloff and trade tensions brewing with the US.

“The market environment became more complex in the first half of the year. Tightening liquidity conditions and protectionist measures by the US have increased volatility since January,” said Michael Sabia, CDPQ’s president and chief executive officer, who added that there is a “change of tone in the market” with the Federal Reserve’s tightening of monetary policy and a potential trade war.

Although the mega-fund’s mid-year results seem sluggish, just under its 3.5% benchmark, CDPQ has averaged a 9.9% annual return over the past five years. The five-year returns also beat its 9% benchmark for that period.

Tags: Caisse de dépôt et placement du Québec (CDPQ), CDPQ, Mid-Year Returns, Pension

The private equity industry managed more than $3.06 trillion at the end of 2017, a 20% rise from $2.56 trillion the previous year, and the highest rate of annual growth ever recorded by data and intelligence provider Preqin.

Preqin said dry powder was a key factor in the growth, referring to assets that have been raised, but not yet invested. The amount of dry powder surpassed $1 trillion to a record $1.03 trillion as of the end of 2017, a 24% increase from the end of 2016, when it stood at $829 billion. By June, 2018, dry powder was up to $1.09 trillion.

“Strong fundraising in recent years paired with a challenging deal environment has resulted in dry powder levels reaching a record [in Q2],” said Christopher Elvin, Preqin’s head of private equity products, in the forward to the firm’s private equity and venture capital quarterly update. “While buyout deal activity did not outpace Q1 levels, the quarter nonetheless saw strong deal flow with KKR’s $9.9 billion acquisition of Envision Healthcare the largest deal announced in the quarter.”

Private equity fundraising slowed down in the second quarter as 230 funds reached a final close securing an aggregate $85 billion in capital, a 7% decline in number of funds, and a 4% decline in capital raised compared to the first quarter. However, because there has been “unprecedented fundraising” in recent times—more than $100 billion was raised each quarter between the fourth quarter of 2016 and the fourth quarter of 2017—overall activity was still considered healthy by historical standards.

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Buyout exit activity increased in the second quarter after a year of decline, with 471 exits valued at a combined $103 billion, the highest exit value recorded since the third quarter of 2015, according to Preqin. The firm also said the unrealized value of invested assets held by fund managers rose 18% in 2017 to reach $2.04 trillion as of the end of December.

It was the seventh consecutive year in which private equity fund managers returned more capital to investors than they have called up, as managers distributed $466 billion to investors. However, the net flow of capital to investors fell to $36 billion in 2017, from $150 billion in 2016 as fund managers also called up a record $430 billion from investors.

Preqin also reported that the number of private equity funds has continued to grow, with a record 3,037 funds on the road at the start of the third quarter targeting $948 billion, a 52% rise in the number of funds raising capital compared to the same time last year, and a 40% increase in aggregate capital targeted.

Forty-four percent of all funds in market are targeting investment opportunities in North America, seeking 49% of all institutional capital targeted. The number of Asia-focused funds in the market has soared 159% to 985 funds in the third quarter from 380 funds during the same period in 2017, with aggregate capital targeted also up 63%.

Tags: dry powder, Private Equity