Strong tech stocks and infrastructure boost Caisse's returns, yet they trail the benchmark’s target
The Caisse de dépôt et placement du Québec reported a 4.2 percent return on its investments for the first half of this year, according to Financial Post.
This performance was mainly driven by strong gains in tech stocks and solid returns from its infrastructure portfolio but fell short of the overall benchmark.
Charles Emond, the chief executive, highlighted several factors influencing the first half of the year: strong stock market performance heavily concentrated in a few tech stocks, the US Federal Reserve's deferral of anticipated rate cuts, and modest global economic growth.
“Discipline is in order going forward, as the second half of the year has already seen its share of twists and volatility,” Emond said in a news release.
The investment returns were below the fund’s benchmark of 4.6 percent for the first half. However, over a five-year period, the fund's annualized average return of 6 percent exceeded the benchmark portfolio's return of 5.3 percent.
The Caisse’s net assets reached $452bn as of June 30, up from $424bn at the same time last year.
The equities portfolio achieved a 13.6 percent return over the six-month period, surpassing the benchmark equity index's return of 13.2 percent, driven by a sharp rise in major US stocks.
The private equity portfolio recorded a 6.9 percent return. Vincent Delisle, senior vice-president at the Caisse, called the S&P 500's gains, which peaked at close to 20 percent in July, “quite astonishing.”
The infrastructure portfolio posted a return of 5.3 percent for the first half of 2024, exceeding its benchmark index of 4.3 percent. Over the past five years, its annualized return of 10.2 percent significantly outpaced the benchmark's 4.5 percent return.
The portfolio played a crucial role in mitigating the impact of high inflation on the total portfolio.
Conversely, the Caisse's real estate portfolio posted a 3.6 percent loss in the first half of this year, primarily due to challenges in the office sector and the high-interest rate environment. Emond noted that the sector has not recovered to its pre-pandemic levels.
He emphasized the Caisse's strategic shift in 2020 towards more promising residential sectors and reduced exposure to office and commercial malls.
The fixed income portfolio recorded a loss of 1.7 percent for the first half of this year, affected by a challenging environment for bonds. The pension fund reported a current yield of 3.1 percent, but higher interest rates dampened any gains.
Despite the challenges, Emond expressed satisfaction with the fund's performance, given the difficult economic conditions over the last six months. He cautioned that the Caisse would continue to diversify due to increasing economic uncertainty for the remainder 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,” Emond said, emphasizing the need to manage risks and remain attentive to geopolitical tensions.
