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The Caisse de dépôt et placement du Québec has announced a 4.2% return for the first half of 2023, despite volatile market conditions. The pension fund’s fixed-income portfolio was boosted by higher interest rates and infrastructure investments that act as a hedge against inflation. However, the fund recorded weaker performance in private equity as its office real estate holdings were affected by a structural transformation, including the shift to remote work.

The Caisse’s net assets increased to 4 billion as of June 30, 2023, compared to 2 billion a year earlier. The fund has adjusted its portfolio over the past three years to better withstand market volatility. According to Chief Executive Charles Emond, market conditions reinforce the Caisse’s strategy of diversification and taking a long-term approach.

Despite the challenging environment, the Caisse has been able to navigate trends such as tightening credit conditions in the United States and the shift to remote work. Vincent Delisle, head of liquid markets at the Caisse, stated that the fund’s large fixed-income portfolio positions them well for the next five to 10 years, with interest rates above four percent and credit returns at 7.5 percent.

The Caisse’s anticipation of trends such as remote work and reluctance to commute has allowed its portfolio to respond better to current conditions than its benchmark. The fixed-income portfolio posted a 3.9% return in the first half of 2023, outperforming the benchmark. In the real assets portfolio, infrastructure investments contributed positively, with a 4.7% return compared to the benchmark’s -2.1%.

Over the five-year and ten-year periods, the Caisse’s average annualized returns were six percent and 7.9 percent respectively, exceeding the benchmark portfolios. However, the private-equity portfolio recorded a return of 1.4%, below its benchmark of 7.2%, due to higher financing costs. Despite this, the portfolio still outperformed the index’s return.

Overall, the Caisse de dépôt et placement du Québec’s performance for the first half of 2023 reflects its adaptability to market volatility and its focus on diversified investments for long-term growth.

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