La Caisse suffers significant drops in alternative portfolios

The Canadian pension's private equity platform had a negative 32% return last year, which it blamed in part on two Lone Star funds. It also took large hits on its real estate and infrastructure investments.

La Caisse de dépôt et placement du Québec lost C$39.8 billion (€24.8 billion; $32.2 billion) of its value during 2008 after reporting significant losses in its real estate, private equity and infrastructure investments.

Private equity returns were minus 31.4 percent for the year, while real estate returned negative 21.9 percent and infrastructure returns were minus 44.7 percent.

La Caisse said in its annual review that 2008 would “go down in history as a year of countless challenges”.

In particular, La Caisse said its investments in two Lone Star funds had “produced poor returns”. At the start of 2008, Caisse said it would invest $1.5 billion in Lone Star Fund VI and Lone Star Real Estate Fund, both of which are targeting investments in Japan, Europe and the US.

The Canadian pension fund manager, which invests money on behalf of 25 public organisations in the country, said its overall portfolio fell in value to C$120 billion at the end of 2008, compared to C$155.4 billion in 2007.

“It will take several years to analyse fully the impacts of the crisis, which, we hope, peaked in the fourth quarter of 2008. Never had we seen such a cataclysm sweep over almost all the world’s asset classes, sectors of activity and markets at the same time,”  outgoing chairman Pierre Brunet said.

The losses have prompted La Caisse to review its asset allocation group and also restructure its asset-backed commercial paper operations, on which took a C$4 billion expense in 2008.

La Caisse’s private equity and infrastructure investments include commitments to Cerberus Institutional Partners (Series Four), Oaktree Capital Management’s Opportunities Fund VII, Park Square Capital, ACH Limited Partnership, Enbridge Energy Partners and PNC Financial Services Group