CDPQ Reports Solid Year of Progress Despite Missing Return Target

Caisse de dépôt et placement du Québec (CDPQ) released its 2019 annual report on Tuesday, highlighting investment performance slumped by global market volatility, and progress in several key initiatives, including environmental, social, and governance (ESG) investing, exposure to international markets, and portfolio diversity.

The CAD $340.1 billion ($251 billion) fund reported a global return in 2019 of 10.4%, missing its benchmark by about 1.6%, and noted that its portfolio is being “tested” by the COVID-19 crisis. Returns for the eight principal depositors ranged from 9.5% to 10.8%.

The fund appointed a new chief executive officer, Charles Emond, to replace the departure of his predecessor Michael Sabia, earlier this year.

“To perform in a competitive environment, you need to have the best talent, both here and around the world. This will be even more important in the next decade, as the global economy suddenly lost steam and CDPQ’s portfolio is tested. Our organization has the teams to take on this challenge under the leadership of Charles Emond as president and chief executive officer,” said Robert Tessier, chairman of CDPQ’s Board of Directors.

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The fund’s five- and 10-year performance clocked in at 8.1% and 9.2%, respectively.

Besides return performance, CDPQ is focused on gaining additional portfolio exposure to international markets. Over the past year it has upped its allocations to the United States, Brazil, Colombia, and other “key growth markets,” increasing its exposure by 2% for the year, surmounting to 66% by year-end. Its international exposure in 2009 was 36%.

Additionally, the fund is focused on increasing its allocations to holdings that promote ESG concerns, as well as investing in its own local Quebec community.

CDPQ added $6.9 billion in investments tailored to climate change-mitigating assets in 2019, continued its proactive leadership in “green” endeavors by co-founding Net-Zero Alliance, and reduced its carbon intensity by 21% since 2017. It has committed to reducing it by an aggregate 25% by 2025.

The fund is also working up to build its roster of low-liquidity assets, and had transacted more than CAD $26 billion into asset classes that provide this attribute (real estate, private equity, and infrastructure) across international markets to achieve this.