Net assets total $165.7 billion, up $6.8 billion
10.5% annualized return over three years
MONTREAL, Aug. 17, 2012 /CNW Telbec/ - The Caisse de dépôt et placement du Québec provided an update today on its performance for the first half of 2012. For this period, it earned a 3.5% weighted average return on depositors' funds. The Caisse's net assets reached $165.7 billion as at June 30, 2012, up $6.8 billion from $159 billion as at December 31, 2011. Net investment results totalled $5.4 billion for the first half of the year and depositors made a net contribution of $1.4 billion.
Over a three-year period, the Caisse posted a 10.5% average annual return. All major asset classes had positive returns for this period, surpassing their benchmark indexes and contributing to the net investment results of $41.1 billion.
"Despite turbulent markets and a global economic downturn, the Caisse generated a positive return in the first half, in line with the long-term needs of its depositors," stated Michael Sabia, President and Chief Executive Officer of the Caisse. "Over a longer period, during the last three years, we have taken a cautious approach in an often highly volatile economic and financial climate, while continuing to execute our strategic plan. Our average annual returns in excess of 10% in this period reflect solid results, given this climate. Conditions will remain unpredictable for some time. Therefore, we will continue to focus on our long-term objectives as we're involved in a marathon, not a sprint."
"How the markets evolve in the coming months will hinge on the uncertainty surrounding management of the European crisis, U.S. public finances and Chinese economic growth," Mr. Sabia said. "As long as this uncertainty persists, it is difficult to foresee improved investor sentiment that could lead to a lasting recovery and lower volatility."
OVERALL RETURN - CAISSE VS. BENCHMARK PORTFOLIO
A chart is available on the Caisse's website
HIGHLIGHTS
"Over the last six months, the Caisse carried out a number of major transactions in line with a strategy based on research and in-depth knowledge of investments. We continued to focus on tangible assets - those closely connected to the real economy - and promising companies that we know and understand well," Mr. Sabia said.
Key investments
A number of infrastructure investment decisions were made in the first half of the year, in particular:
- the Caisse increased its equity interest to 30% in Keolis Group, one of Europe's leading public transport operators, which the Caisse owns in partnership with SNCF; and
- in co-operation with Plenary Group, the Caisse also announced an investment in five public-private partnership projects in Australia, including the Melbourne Convention Centre ($145 million).
Ivanhoé Cambridge, the Caisse's real estate subsidiary, announced several investments, including:
- the PSA Peugeot Citroën head office in Paris ($350 million);
- the River Point office tower in Chicago ($300 million);
- shopping centres in Brazil ($640 million); and
- increased holdings in four shopping centres in Canada ($510 million), including two in Québec ($225 million).
The Caisse was very active in financing Québec companies in the first half of 2012, with new investments totalling $1.6 billion.
In line with its strategy to serve as a bridge between Québec companies and global markets, the Caisse supported the international expansion of companies such as CGI ($1 billion) and GENIVAR ($100 million). The Caisse also invested in Laurentian Bank ($100 million) to help it expand across Canada and enabled Innergex ($100 million) to make acquisitions in Québec and British Columbia.
The Caisse made additional investments in some of its portfolio companies, including Camoplast Solideal, Garda, RONA and SSQ Financial Group. Furthermore, to stimulate the growth of small and medium-sized businesses and to support regional development, the Caisse:
- increased its investment capital for publicly traded small-cap companies by $150 million; and
- continued to invest as part of our agreement with Desjardins Group, bringing total investments to almost $230 million over the last three years in more than 90 companies.
Risk management and financial stability
The Caisse's overall portfolio liquidity, totalling close to $44 billion, remained very robust. The overall risk of the Caisse's portfolio was substantially unchanged from December 31, 2011. Furthermore, the Caisse made significant progress with respect to counterparty and credit risk.
Cost control
Operating expenses and external management fees are consistent with forecasts and remain unchanged from 2011 (less than 20 cents per $100 of assets under management), reflecting the Caisse's highly efficient management, which compares advantageously with its peers.
RETURNS
"The first six months of the year were marked by the European crisis and the recession in that region," said Roland Lescure, Executive Vice-President and Chief Investment Officer of the Caisse. "Amid the uncertainty surrounding the global economy, investors turned to safe havens, putting downward pressure on Canadian, German and U.S. interest rates."
"In a half-year period characterized by high volatility in all equity markets, the Canadian stock market was adversely affected by lower commodity prices. Despite this difficult context, we were able to earn a positive return on all our asset classes, with targeted strategies, astute security selection, diversification and ongoing risk management," Mr. Lescure added.
Net investment results
RESULTS FOR SIX MONTHS AND THREE YEARS
A chart is available on the Caisse's website
The net investment results for the first half of the year were earned primarily by the Equity portfolios, which generated $3 billion of the $5.4 billion. Fixed Income, particularly the Bond and Real Estate Debt portfolios, produced an additional $1.2 billion. Over three years, all asset classes contributed substantially to the net investment results of $41.1 billion.
Returns as at June 30, 2012
| RETURNS BY ASSET CLASS AND DIFFERENCE IN RELATION TO THE BENCHMARK INDEX | ||||||
| 6 months | 3 years | |||||
| Asset class | Return | Index | Difference | Return | Index | Difference |
| (%) | (%) | (%) | (%) | (%) | (%) | |
| Fixed Income | 2.0 | 1.8 | 0.2 | 8.4 | 7.0 | 1.5 |
| Inflation-Sensitive Investments | 2.6 | 4.9 | -2.3 | 14.0 | 10.5 | 3.5 |
| Equity | 4.2 | 4.6 | -0.4 | 10.2 | 9.2 | 1.0 |
| Caisse return(1) | 3.5 | 3.7 | -0.2 | 10.5 | 8.9 | 1.6 |
(1) The total includes ABTN, Hedge Funds, Asset Allocation, Overlay Strategies and cash management activities of individual funds.
For the first half of the year, the Caisse's return was 3.5% versus 3.7% for its benchmark portfolio. The Private Equity and Real Estate portfolios underperformed their respective benchmark indexes during the six-month period. Equity portfolios posted overall results that are in line with their benchmark indexes. Moreover, the Bond and Real Estate Debt portfolios outperformed their benchmarks during the period.
Over three years, the Caisse earned a 10.5% average annual return, versus an 8.9% return for the benchmark portfolio. The 1.6% positive difference is due mainly to the Private Equity, Infrastructure, Bond and Real Estate Debt portfolios.
Asset allocation
As at June 30, 2012, the Equity asset class represented about 47% of the overall portfolio, with 37% in publicly traded securities and 10% in private equity. The Fixed Income and Inflation-Sensitive Investment asset classes, which are much less sensitive to market fluctuations, represented 37% and 14% of the portfolio, respectively.
ABOUT THE CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC
The Caisse de dépôt et placement du Québec is a financial institution that manages funds primarily for public and private pension and insurance plans. As at December 31, 2011, it held $159 billion of net assets. As one of Canada's leading institutional fund managers, the Caisse invests in major financial markets, private equity and real estate.
For more information: www.lacaisse.com.
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ECONOMIC
OUTLOOK
The global economy has lost momentum in recent months with the rate of increase of industrial production falling to zero in both developed and emerging economies. Some signs of improvement can be seen, especially in the United States, but global economic growth remains weak and downside risks prevail.
Since 2008, central banks, notably the Federal Reserve in the United States, have provided important support to the global economy by implementing non-conventional monetary policies. However, the efficacy of these policies seems to be diminishing. With policymakers' margin of manoeuvre becoming increasingly narrow, a return to sustainable growth for the world economy will require the authorities to make sound policy decisions. More important, the capacity to execute such decisions with efficacy and credibility will be crucial.
The global economy decelerates
Quarterly percentage increase in industrial production
A chart is available on the Caisse's website
Fiscal austerity in the four principal economies of the euro area
Fiscal tightening as a percentage of potential GDP
A chart is available on the Caisse's website
In Europe, the policy response to the sovereign debt/banking crisis has repeatedly arrived at the last minute, often after acrimonious debate, and has been difficult to implement. Consequently, the European debt crisis has escalated to the point that it represents a genuine threat not only for Europe but also for the global economy.
The euro-area economy fell back into recession in the second quarter of 2012 as a result of unprecedented fiscal austerity in several countries, most notably Italy and Spain, whose economies have been contracting sharply. While fiscal austerity is a necessary part of the solution to the debt problem, the escalating weakness of the European economy calls into question the aggressiveness of the current austerity packages. Since the Euro Area Summit, held at the end of June, a comprehensive strategy for resolving the debt crisis appears to be taking shape. Europe needs an effective, well-executed plan to restore economic growth soon.
United States housing market: the worst has passed
Residential investment in constant dollars and the median price of single family homes
A chart is available on the Caisse's website
The United States is also in the process of reducing its indebtedness. Historically, episodes of deleveraging have been measured in years rather than in quarters and have been characterized by slow, fragile growth. To date, American households have made significant progress in repairing their balance sheets. There is also convincing evidence that the housing sector has bottomed and is beginning to improve. But government debt has increased markedly since the onset of the financial crisis and the next administration will have to begin to restore order to the public finances. The aggressiveness and content of the deficit-reduction plan will have major implications for the economy. Even if the so-called fiscal cliff is resolved by a multi-year plan of fiscal austerity, the result will be a U.S. economy that grows modestly at best. Strong political will and improved collaboration between the political parties will be required to manage the situation. The risk of political dysfunction in the United States remains omnipresent.
China : growth decelerates
Contributions to the increase in real GDP
A chart is available on the Caisse's website
The growth rate of the Chinese economy has fallen from about 10 per cent to around 7.5 per cent in the past 18 months. The slowdown is largely attributable to a tightening of monetary policy in 2010 and early 2011 and weaker demand from Europe recently. Commencing last November, the Chinese authorities have responded with a series of measures to boost growth. The fruits of these efforts should become apparent soon. Nevertheless, China faces a major challenge. Going forward, it is clear that Chinese growth must be based much more on domestic consumption and much less on investment and exports. Given the importance of the Chinese economy for the Canadian economy, and especially Canadian financial markets, it is important that this challenge be deftly managed.
Other emerging economies, such as Brazil and India, have also experienced sharp decelerations in economic growth in recent months. They will need to revitalize reform efforts in order to restore more rapid growth.
The prices of oil and food commodities surge
Prices of Brent crude oil and food index of the Commodity Research Bureau (CRB)
A chart is available on the Caisse's website
The prices of many food commodities have increased in recent weeks because of poor weather in many growing regions. Recently, the price of Brent crude oil has also risen considerably, owing, at least in part, to rising geopolitical tensions in the Middle East and the embargo imposed by the United Nations on imports of Iranian oil. Global economic growth could be weakened if these prices increase further - or even if they remain at current levels.
SOURCE: CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
Maxime Chagnon
Senior Director, Media Relations
514 847-5493
[email protected]
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