The Caisse de dépôt et placement du Québec plans to adjust its investment strategy to cope with the global credit crisis whose scope and effects are still uncertain.
“This uncertainty has prompted the Caisse to manage with strategies that emphasize caution, preservation of capital and risk reduction,” says Richard Guay, the pension fund’s president and chief executive officer.
At the end of last year, the Caisse’s net assets were allocated as follows: 36.3% in equities, 29.5% in fixed income and currencies, and 35.1% in other investments, mainly private equity and real estate. The allocation to equities usually ranges from 40% to 60% in the industy.
The decline in the stock market has increased the weighting of all other asset classes. To avoid accentuating this imbalance, the Caisse decided in early October to subject its private equity and real estate operations to a new approval process and to manage new investments in these areas with additional care.
“We will come through this crisis as we have come through the other crises that have occurred in the history of the Caisse,” he says, adding that after the downturn in 2002, depositors’ net assets doubled to $155.4 billion from $77.7 billion as a result of $63.1 billion of returns and $14.6 billion of net deposits.
The pension fund also reiterated its long-term returns take into account the possibilty of negative results one every four or five years. Its average annual return for the past five years is 12.4% and its long-term target return is about 7%.
While the Caisse won’t disclose how its portfolio has performed for the current year, it does say it will be able to fulfill all its commitments to its depositors and business partners. Deposits will also continue to exceed withdrawals for many years.
It says periods of extreme volatility have always gradually come to an end, and sooner or later the initiatives taken by governments around the world to resolve the crisis will have a positive effect.
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