Buyouts boost Caisse results(2)

The Quebec pension fund had a 14.6 percent return on investments last year, and experienced comparable gains for its public and private equity portfolios.

Caisse de dépôt et placement du Québec, the C$237 billion ($204 billion, €156 billion) Canadian pension fund, made a return of 14.6 percent across all its investments in 2006, the fund announced this week. Its performance was down slightly from 2005’s 14.7 percent return, and still well above 2004’s 12.2 percent figure.

The pension fund giant’s public and private equity market portfolios, which constitute nearly half of Caisse’s investments, led its gains. Its equity market portfolios had a return of 20.9 percent, and its private equity portfolios returned 22 percent.

The close performance of its public and private equity portfolios will likely fuel the debate about fees charged by private equity managers for out-performing public markets.

Caisse has C$53 billion invested in seven public equity portfolios, and C$16.8 billion invested in two private equity portfolios. One of its two private equity portfolios had a return of 30.4 percent due largely to the strength of buyouts.

The Quebec scheme has been moving away from bonds and equities and increasing its allocations to alternative assets, which now make up 35.6 percent of its portfolio, an unusually high amount when compared to most pension funds.

Caisse is also active in private equity through participation in bidding consortia.

Earlier this month it formed a €250m joint venture, Actera Partners, with the Ontario Teachers’ Pension Plan to invest in Turkish private equity.

CDP Capital, an investment arm of the Quebecois fund, was part of the bid consortium for UK airport operator BAA last March.

The performance of Caisse’s public equity portfolios was boosted primarily by Canadian equities, which had a return of 22 percent. Close behind these gains, was the 20.2 percent return from Caisse’s real estate portfolios, which it values at C$23.2 billion. Its C$5.6 billion hedge fund portfolio returned 5.7 percent.

“All the investment groups made a positive contribution to the Caisse’s absolute return and value added,” said president and chief executive officer, Henri-Paul Rousseau, in a statement.

In 2006, the value added – the difference between Caisse’s 14.6 percent return and the 12.7 percent return on the market indexes – was C$2 billion, Caisse said.