CDPQ Returned 9.3% in 2017

Canada’s second-largest pension fund manager reports five-year return of 10.2%.

Caisse de dépôt et placement du Québec, (CDPQ) Canada’s second-largest pension fund manager, reported a 9.3% return for 2017, and an annualized return of 10.2% over the past five years.

CDPQ said its 2017 return reflected strong equity market performance, but did not fully capture the surge in multiples for tech companies and companies with an accelerated growth profile.

CDPQ’s eight main clients received returns between 8.0% and 10.9% for the year ended Dec. 31, 2017, and between 8.7% and 11.5% over the past five years. Net investment results for the year were C$24.6 billion, and net deposits totaled C$3.2 billion.

Total net assets were C$298.5 billion, increasing by C$122.3 billion over five years, with net investment results of C$109.7 billion and C$12.6 billion in net deposits from its clients.

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“Over a five-year period, we achieved our objective: a solid return that exceeds both our benchmark and the long-term needs of our clients,” said Michael Sabia, CEO of CDPQ, in a release. “With C$6.7 billion in new investments and commitments, we’ve had an exceptional year in Québec.”

CDPQ said that compared to its benchmark portfolio, its performance represented C$12.2 billion of added value for its clients over the last five years. The firm said it focuses on equities that provide stable and predictable returns in order to reduce sensitivity to market fluctuations, such as the volatility that hit the global markets in early February.

“We are facing an unusual environment,” said Sabia. “This volatility could have materialized at any time in recent months. So we continue building a more resilient portfolio that can withstand market transitions of this kind.”

The fund manager has significantly diversified its geographic exposure over the last five years, expanding its global investments by C$105 billion to more than C$190 billion. It also more than doubled its exposure in growth markets, which rose to more than C$35 billion at the end of 2017 from C$15 billion in 2012.

CDPQ said it repositioned its fixed-income assets in 2017 during a period when interest rates remained low, and bond returns were expected to be modest. It looks to diversify its activities by reducing its exposure to the traditional bond market, and increasing its credit activities in higher-performing market segments, including corporate credit, sovereign credit, and specialty finance.

The firm also reported more than C$7.6 billion in private equity transactions completed internationally. Some high-profile transactions include the acquisition of GE Water, a waste water management company, in partnership with SUEZ. CDPQ also invested in Sabia, a company that provides medical diagnosis technology, and Fives, an engineering group.

CDPQ also acquired a stake in eight Mexican wind and solar farms operated by Enel Green Power, and invested over C$390 million in Québec wind energy producer Boralex. The firm has doubled its worldwide infrastructure holdings over the last five years to more than C$16.0 billion.

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South Korea Pension Fund Launches CIO Search

Third-largest pension fund has been without permanent CIO since July.

South Korea’s 615 trillion won ($570 billion) National Pension Service (NPS), which claims to be the third-largest pension fund in the world, has reportedly launched its search for a new CIO to replace Myoun-wook Kang, who resigned seven months ago. The fund’s current acting CIO is In-Sik Cho.

The pension fund has established a search committee that will accept applications from interested candidates until March 20, according to Asia Asset Management. NPS CEO Sung-joo Kim said the person who is chosen should have “high moral standards” and “global investment capabilities.”

The search committee will create a short list of applicants, and then recommend a candidate to Kim, who will then need the approval from South Korea’s minister of health and welfare.  Kang resigned in July for personal reasons, seven months before his two-year term was set to expire.

Since the pension fund moved its headquarters last year from Seoul to Jeonju-si, which is more than 100 miles away, it had lost a significant number of employees who grew weary of the long commute. It reportedly took three hours to travel to Seoul from the new office for meetings with clients and external managers.

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The National Pension Fund has recorded a 5.86% annual average rate of return since its foundation in 1999 to the end of 2016.

Meanwhile, South Korean news agency Yonhap reported that a growing number of people are applying to re-subscribe to the state pension plan after being disqualified due to failure to meet mandatory policy terms or other reasons.

As of Feb. 9, nearly 15,000 people have applied to return the lump-sum insurance payouts they received because they failed to pay premiums for a mandatory period, according to NPS data. The return system allows applicants to pay back the insurance money plus interest to the state pension to regain eligibility.

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