The Public Sector Pension Investment Board posted a negative 0.6 per cent net return for the fiscal year, which ended March 31, 2020.
Severe market declines in the lead up to the end of March took a heavy toll. However, the fund did outperform its reference portfolio, which saw a negative 2.2 per cent return.
PSP Investments now holds $169.8 billion in net assets under management, representing a 1.1 per cent increase from the $168 billion it held the year prior.
“I want to thank the PSP Investments team for their work safeguarding the investments made on behalf of the public sector pension plans, many of whose members are among the frontline heroes actively supporting Canadians during the COVID-19 pandemic,” said Neil Cunningham, president and chief executive officer at PSP Investments, in a press release. “Despite the decline in equity markets before the year-end, we were able to exceed the reference portfolio for the fiscal year and maintain a long-term return of 8.5 per cent, which outperformed both the 10-year reference portfolio return of 7.2 per cent and the 5.7 per cent long-term return objective.”
By asset class, natural resources posted the worst return at negative 5.2 per cent for the fiscal year. “Performance for the current year was dampened by COVID-19, which significantly impacted the carrying value of the group’s non-core oil and gas assets,” the release noted. “The crisis did not have a significant impact on our core agriculture and timberland investments.”
Real estate, was also a drag on the portfolio, returning negative 4.4 per cent. “The pandemic significantly impacted the value of the global retail portfolio and more specifically the malls in the U.S,” the release added. “The Alberta office portfolio was particularly impacted by the pandemic and the drop in oil prices that exacerbated the negative sentiment on the Alberta economy. The impact on our global industrial assets was more subdued as the sector produced a positive return.”
Public markets, including absolute return strategies, posted a negative three per cent loss, while infrastructure saw the most robust performance, posting an 8.7 per cent return, followed by private equity (5.2 per cent) and credit investments (4.3 per cent).
The fund’s long-term focus has served it well during the coronavirus pandemic and is more important than ever, said Eduard van Gelderen, senior vice-president and chief investment officer at PSP Investments. “Before the pandemic, we were preparing for an eventual market downturn after many years of sustained growth in order to be able to respond quickly if a crisis occurred. Our strategies have proven their effectiveness in maintaining our portfolio’s stability and liquidity during tumultuous times.”