PSP private equity portfolio marks a loss for 2017

The Canadian pension plan’s private debt, real estate and infrastructure portfolios boosted performance compared with fiscal year 2016.

The Public Sector Pension Investment Board's private equity portfolio posted a loss of 3.4 percent for the fiscal year 2017 ended 31 March, below its 9.3 percent return target, the pension plan said on Wednesday.

The private equity portfolio's performance “remains a challenge” and was “negatively impacted by certain legacy investments in technology and communications”, PSP wrote in its 2017 annual report. 

On a five-year annualised basis, the portfolio returned 7.8 percent. During the 2017 fiscal year, PSP grew its private equity portfolio by C$3.4 billion ($2.6 billion; €2.3 billion), to C$15.5 billion, as of 31 March. 

The pension plan did much better in other asset classes. Its growing private debt portfolio showed a 27.5 percent return over the one-year period ending 31 March. 

This represents more than double its 12.4 percent target return for the asset class. The one-year period marks the first full fiscal year that private debt platform has been in operation, the annual report showed.

The Canadian pension plan boosted its private debt assets to C$4.4 billion by March, up from C$640 million a year prior. By comparison, PSP's total assets under management reached C$135.6 billion, a 16.1 percent increase from C$116.8 billion in AUM a year earlier.

With 92 percent of its private debt portfolio in the US, the group committed a total of C$4 billion across 30 transactions, including investments in first and second lien term loans, unitranche term loans, secured and unsecured bonds and a credit fund.

The firm was not immediately available to comment.

Other asset classes in the pension plan's portfolio also surpassed return benchmarks over this period.

Real estate showed a one-year return of 10.8 percent, compared with its 6.2 percent benchmark. The report cited office portfolios in Paris, London and in Australia and senior retirement and healthcare portfolios in Canada and the UK for causing the allocation's strong performance. This asset class grew slightly to C$20.6 billion in net assets, up from C$20.4 billion 31 March 2016, with nearly 43 percent of its portfolio in the US.

Infrastructure earned a 14.4 percent one-year return, well over its return target of 5.2 percent. PSP attributed the strong performance to investments in transportation, communications and renewable energy sectors, especially in Europe, which accounts for 47.1 percent of the asset class investments. This asset class hit C$11.1 billion in net assets by 31 March, up from C$8.7 billion a year prior.

The C$135.6 billion PSP overall portfolio generated a 12.8 percent net return for the year ending in March and five-year annualised net return of 10.6 percent, above its 9.4 percent portfolio benchmark return.