The Caisse de dépôt et placement du Quebec has posted a weighted average return of 3.5% on its portfolio in the first six months of 2012. This is slightly under the fund’s benchmark of 3.7%, but is good nonetheless considering the difficult global markets.
“It’s a number we think is very well lined up with the needs of our depositors and the performance of others and, indeed…well lined up with our reference portfolio,” says Michael Sabia, CEO of the Caisse. He continued to say that the fund is very comfortable with the return since the gap between it and the benchmark is minimal. “For us, it’s almost the same thing.”
The Caisse said its net assets reached $165.7 billion at the end of June, up $6.8 billion from $159 billion at the end of 2011. The fund’s investments contributed $5.4 billion to the increase, and depositors made a net contribution of $1.4 billion.
Over a three-year period, the Caisse has posted a 10.5% average annual return. It said all major asset classes had positive returns for the three-year period, surpassing their benchmark.
Looming recession? Sabia said the Caisse isn’t anticipating a global recession but does see risks in Europe, China and the U.S., although they are essentially political, not economic, risks.
Earlier this summer, the pension fund manager said it would become more selective in its stock market picks and put more emphasis on private placements in infrastructure and real estate. The changes would be made gradually as the pension fund manager does more in-depth study on its investments to keep volatility in check, Sabia has said.
Rona’s poor performance More recently, the fund has become embroiled in the controversial $1.76-billion unsolicited takeover bid late last month by U.S.-based home improvement retailer Lowe’s for Quebec-based Rona.
Sabia said he couldn’t comment on whether the Caisse would buy any more shares in Rona but noted the value that Rona brings to the Quebec and Canadian economies. However, he said value has to be created for Rona’s shareholders, and it’s a “priority” to improve the company’s performance. “Those will be the things that guide our decision-making with respect to this going forward.”
Rona has said it isn’t interested in the $14.50 per share offer, which would give Lowe’s a bigger foothold in Canada, but which Rona says undervalues the company. The Quebec government has also criticized the bid as not in the best interests of either province or Canada and is examining ways to counter the Lowe’s offer.
The Caisse, for its part, quickly announced that it had increased its stake in Rona by two percentage points to 14.2%, as it noted the economic benefits of having Rona’s head office in the province.
The powerful Caisse has acted before to protect interests it sees as vital to Quebec’s economy. In 2000, the Caisse did not support a bid by Rogers Communications Inc. to buy Quebec cable company Vidéotron and joined forces with Quebecor Inc. to thwart the Toronto company’s bid.