The Caisse de dépôt et placement du Québec returned 7.2% in 2023, a result hurt by the underperformance of the institution's significant private placement portfolio.
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“The year 2023 was marked by high volatility in bond markets and a historic concentration of gains in a handful of American technology stocks,” Caisse CEO Charles Emond said on Thursday.
At 7.3%, the institute's return was slightly below that of the reference portfolio against which it measures its performance.
Over 5 years and 10 years, the fund's annual returns are 6.4% and 7.4%, respectively.
The Caisse ended the year with assets of $434.3 billion, up $32 billion in a year.
“Caisse de dépôt etplacement du Québec”
In the fixed-interest area (bonds and loans), the institute achieved a return of 8.1%, which was above the return of its reference index of 7.7%.
On the stock markets, the institute returned 17.7%, compared to 17.4% for its index.
The glory seven
The Caisse achieved this respectable performance while being underweight the seven American stocks that boosted the stock market last year. These are the “Magnificent Seven”: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. As of Dec. 31, the institution held about $9.5 billion in these companies.
“Caisse de dépôt etplacement du Québec”
“We have some, Magnificent Seven, but still less than the market [les indices], specified Mr. Emond. If we wanted as much as the market, [il faudrait y consacrer] 17 billion dollars. […] Would we do that? Never. We want it to be smart. Are we buying all seven blindly? No, we buy some more than others.”
The fund's investments in private placements (external funds and shares of unlisted companies) returned a paltry 1%, far behind the benchmark portfolio, which gained 10.5%.
The above-average indebted companies involved in private placements suffered more from the rise in interest rates, explained Charles Emond.
“If you have more influence [endettement] and interest rates go up, even if your profits go up, the rise in interest rates will affect it,” he said.
Private placements account for 18.4% of the fund's assets, a significantly higher percentage than a few years ago. Over 10 years, the annual return of this portfolio still remains interesting, reaching 13.4%, compared to 10.6% for the index.
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Things are still difficult in real estate
In the real estate sector, the institute achieved the worst return in 2023, namely -6.5%, compared to -10% for the index. A few weeks ago, the Caisse announced the repatriation of its real estate subsidiaries Otéra Capital and Ivanhoé Cambridge, while its managing director Nathalie Palladitcheff announced her resignation.
In the infrastructure sector, the institute achieved a return of 9.6%, well above the return of its reference portfolio of 0.3%.
Note that the fund's management fees jumped in 2023 and amounted to 0.59%, compared to 0.48% in 2022. The situation can be explained by the increase in performance fees paid to external fund managers.
The fund in 2023
- +7.2% Overall performance
- +8.1% Fixed-interest securities
- +17.7% Stock markets
- +1.0% Private placements
- +9.6% Infrastructure
- -6.2% Property
- $434 billion (As of December 31) Total assets
- 88 billion dollars (20%) Active in Quebec