Quebec pension trims PE in favor of direct investments

Year-end results show a 12 percent portfolio return for 2014

 

La Caisse de dépôt et placement du Québec, the management company for the pension funds of Québec, has reported a 12 percent return for 2014 and a 9.6 percent return over the past four years. Assets under management have increased to $225.9 billion, an increase of $74.2 billion since 2010.

La Caisse attributed much of the 2014 returns to fixed income, inflation-sensitive investments and equities.  

The weight of the private equity portfolio was cut significantly. In 2010, private equity accounted for almost 70 percent of the illiquid portion of client portfolios. Private equity now represents 45 percent, with the remainder going to direct investments. La Caisse said in its annual report that direct investments have provided “superior performance” over the past four years.

 

In 2014, the private equity portfolio generated net investment results of $9 billion, with a 13 percent annualized return. In 2014, the portfolio returned 12.1 percent, exceeding the long-term target return. La Caisse noted that many of the companies in the portfolio took advantage of lower interest rates to refinance their debt this year, contributing to positive performance on top of strong investments and exits.

La Caisse provided a handful of high profile growth capital and private financing investments to Québec companies elsewhere in Canada and internationally over 2014. Agropur, ALT Hotels and the architectural firm Lemay, all saw investments from the illiquid portfolio.

 

Following the example of other Canadian pensions, la Caisse is also expanding its global footprint by shifting 5 percent of its exposure to other markets over the past four years, bringing global exposure to over 47 percent of the portfolios. La Caisse also opened offices in Washington D.C. and Singapore in 2014, and has plans to open offices in Mexico City and Sydney this year.