Canadian provincial pension fund British Columbia Investment Management Corporation (BCI) reported a 3.5% return for FY2022/23 with notably strong performances in infrastructure and emerging markets.
The fund’s net assets under management rose 1.8% to C$215 billion (US$159 billion), reflecting C$6.7 billion of net investment gains and C$2.8 billion of client withdrawals. In US$ terms, net AUM fell 5.9% due to the 7.5% depreciation of the C$. BCI fell short of the 4.4% return reported by federal-level public pension fund PSP Investments, but exceeded Canada’s biggest fund CPP Investments which reported a 1.3% return.
In terms of asset classes, BCI trumped benchmarks across all public equities, with emerging markets outperforming its benchmark by 3.5% with a 0.3% return. Meanwhile, in fixed income it saw a return of -0.6%, which was 1.1% above the benchmark.
Private equity also had a robust performance with a return of 4.7% compared to its -10.4% benchmark. BCI invested a record C$9.8 billion in overall capital with C$3.7 billion allocated to 14 direct investments including capital commitments to existing investments.
The strongest performance came in infrastructure with 9.2%, which was 2.8% above the benchmark. BCI put this down to its “regulated utility assets exposure, which has been resilient to rising interest rates, and strong capital appreciation.”
Managed by BCI subsidiary QuadReal Property Group, real estate had a 7.2% return (0.3% value added) and real estate debt was 4.6% (1.3% above benchmark) – an outperformance it attributes to “overweight sector allocation to industrial, residential, and alternative assets, with geographic diversification.”
To assess value-added from active management, funds should be compared in relation to their performance against their respective reference portfolios. BCI was the leader, with a 3.2% outperformance in the annual return, compared to CPP’s 1.2% and PSP’s 0.2%. However, over a 10-year period, BCI’s outperformance was 1.3% and CPP was 0.8% per annum while PSP notched up 1.6% - and long-term performance is the most valuable indicator for public pension funds with multi-decade horizons.
BCI’s performance comes in the context of its global push, which has put it at the forefront of international consortia with other SWFs and PPFs. As a part of its geographical diversification strategy, it has opened new offices in New York in 2022 (private equity) and London in February this year (infrastructure).
The new London office hosts an infrastructure and renewable resources (I&RR) team, headed by Lea Dubourg-Hrachovec. BCI’s I&RR program was valued at approximately C$22.3 billion (US$16.5 billion) at end-March, and invests in tangible long-life assets in the Americas, UK, Europe, and Asia Pacific, including a portfolio of direct investments in regulated utilities, energy, telecommunications, transportation, timberlands, and agri-businesses.
Last year, BCI completed its biggest investment outside North America, joining Macquarie Asset Management in a consortium that acquired a 60% equity interest in National Grid Plc’s UK gas transmission and metering business (NGG), on the basis of a GBP9.6 billion (US$12.6 billion) enterprise value. An office would enable BCI to originate its own deals – and our data demonstrates that the presence of an office massively increases investment in a country.
The Canadian fund has also increasingly turned its attention to emerging markets, particularly Indian infrastructure. In April, BCI joined other anchor investors, including Abu Dhabi sovereign funds ADIA and Mubadala, in the INR52.2 billion (US$630 million) listing of leading Indian infrastructure investment trust, Cube Highways Trust; the InvIT aligns well with BCI’s strategy of investing in infrastructure platforms.