Sabia: “Party is over” as Caisse returns slide

Pension fund posts 9.1% return for 2015

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story_images_popped_balloonAmid monetary easing, declining oil prices and anemic global growth, Caisse de dépôt et placement du Québec posted a return of 9.1% for 2015, down from 12% in 2014. The Caisse, whose annualized average return over four years reached 10.9% last year, saw its fixed income assets take the greatest hit.

“Unfortunately, the party is over,” Michael Sabia, the Caisse’s president and CEO, said of bonds, speaking at a press conference on Wednesday morning.

The Caisse’s fixed income assets returned 3.9% in 2015. This compares to 8.4% in 2014.

The future looks even bleaker, said Sabia. “It’s not realistic to expect better returns in fixed income,” he explained. “Global economic growth is chronically weak. This means we’re not far from the limits of monetary policy.”

The equity portfolio of the Caisse, which manages assets mainly for public and parapublic pension and insurance plans in Quebec, also took a bit of hit last year. It returned 11%, down from 13.9% in 2014. “In 2015, markets were extremely difficult,” Sabia said, adding later that “there’s no engine of growth” in the current global economy.

The investor’s inflation-sensitive portfolio, which includes real estate, infrastructure and real return bonds, had steadier performance. It yielded 10.5% in 2015, compared to 11% in 2014. About half of this portfolio is filled with foreign assets and the goal is to move towards further globalization, Sabia said. “These markets are filled with opportunities.”

At the end of last year, the Caisse’s net assets reached $248 billion. This compares to $225.9 billion as of Dec. 31, 2014 and $159 billion as of Dec. 31, 2011. During that four-year period, the investor achieved net investment results of $81.6 billion.

Last year’s net investment results amounted to $20.1 billion.

The Caisse’s operating costs totalled $424 million last year, a number that includes external management fees. The ratio of expenses was 18 cents per $100 of average net assets.

Overall, the 2015 performance of Caisse’s assets is “solid,” Sabia concluded. “Faced with a world that was quite turbulent, I think our strategy has worked.”

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