Caisse de depot posts 4.2% return in the first half

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The Caisse de dépôt et placement du Québec posted a 4.2 per cent return on its investments for the first half of this year, driven mainly by good performance in tech stocks and solid returns from its infrastructure portfolio, but coming in below its overall benchmark.

“The first half of the year was characterized by different factors: strong stock market performance that continued to be linked to a historic level of concentration in a handful of tech stocks, the U.S. Federal Reserve’s deferral of many rate cuts that were anticipated at the beginning of the year and modest global economic growth,” said chief executive Charles Emond, in a news release. “Discipline is in order going forward, as the second half of the year has already seen its share of twists and volatility.”

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Investment returns fell short of the fund’s benchmark of 4.6 per cent in the first half. Over a five year period, the fund’s annualized average return of six per cent still tops the benchmark portfolio’s return of 5.3 per cent.

The Caisse’s net assets totalled $452 billion as of June 30, 2024, up from $424 billion the same time last year.

The returns were driven mainly by strength in its equity and private equity portfolios.

The equities portfolio posted a 13.6 per cent return over the six month period, above the benchmark equity index’s return of 13.2 per cent. The performance was driven by a sharp rise in major U.S. stocks. In private equity, the portfolio earned a return of 6.9 per cent.

“The numbers speak for themselves,” said Vincent Delisle, senior vice-president at the Caisse, during a press conference in Montreal, calling the S&P 500‘s gains since the beginning of the year, which peaked at close to 20 per cent in July, “quite astonishing.”

The infrastructure portfolio posted a return of 5.3 per cent for the first half of 2024, above its benchmark index of 4.3 per cent. Over the past five years, the annualized return of 10.2 per cent has been well in excess of the benchmark’s 4.5 per cent return.

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“The portfolio played an important role in limiting the impact of high inflation on the total portfolio, given the context of recent years,” the release said.

The Caisse’s real estate portfolio, however, posted a loss of 3.6 per cent in the first half of this year, due to difficulties facing the industry, particularly the office sector, and the high interest rate environment, which has weighed on financing costs.

“This sector has not been able to regain its level since the pandemic,” Emond said during the press conference. “What I want to stress is that as you know we started pivoting in 2020, we have bought more residential sectors that were more promising and our exposure went down in terms of offices, commercial malls, that face some headwinds.”

The Caisse’s fixed income portfolio recorded a loss of 1.7 per cent for the first half of this year, driven by a difficult environment for bonds. The pension fund reported a current yield of 3.1 per cent, but higher rates dampened any gains.

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Overall, Emond said he remains satisfied with the fund’s performance, given the difficult economic environment over the last six months and cautioned the Caisse will continue to diversify due to growing economic uncertainty for the rest of the year.

“What I like from these results is that it’s a portfolio that we’ve got that is well diversified, that delivers what is expected in the current context,” he said. “We have to manage our risks well, where there are good investment themes, where there are tailwinds, and be attentive when it comes to geopolitical tensions.”

• Email: jgowling@postmedia.com

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