Few public pension funds have the kind of commitment CDPQ has to their home economies, with most focused solely on optimal returns.
While CDPQ’s mission remains wedded to the best value for its depositors, it also pursues a mandate to support the economic development of the province of Québec. This week saw the Québecois fund funnel C$125 million (US$93 million) into Montreal-based GSoft, a leading software company behind employee management software.
Echoing the CDPQ ethos, Martin Gourdeau, President & General Manager at GSoft, said, “CDPQ is an ideal partner for us because they value our strong fundamentals and our sustainable approach to growth, both of which have been at the heart of our success from day one and set us apart in the B2B SaaS market. With their support, we will accelerate our growth strategy through acquisitions, broaden our product offering, amplify GSoft’s presence and gain market share in existing and new markets.”
CDPQ aims to have C$100 billion in Québec assets by 2026, from C$78.4 billion in 2022. In 2022 alone, it made new investments and commitments of C$4 billion in the province, supporting local businesses expand their global reach and accelerate technological change. The fund established Espace CDPQ as a hub to facilitate investment in innovative high-potential companies in Québec. In 2022, Espace CDPQ partner firms completed 105 investments and reinvestments in Québec, for a total of C$211 million, and participated in 16 co-investments, including 11 targeting Québec-based companies.
Observers might highlight the concentration of risk, given that Québec’s economy is C$391.2 billion (US$293 billion) – if it were an independent country, it would have an economy similar in size to Finland. Yet, CDPQ is confident it can originate good deals in a very familiar market. Indeed, its Québec portfolio grew at an annual average of 15% in 2017-2022, which compares favourably with an annualized return of 5.8% for the whole portfolio over the period.
Venture capital and business incubation are major features of CDPQ’s home province strategy, although infrastructure also features prominently – such as the Réseau express métropolitain (REM) and the REM de l’Est, which form the electric light rail system being rolled out in Montreal.
The GSoft investment comes two months after CDPQ renewed its collaboration with the Québec Emerging Managers Program (QEMP) to boost the growth of emerging manager firms and the province’s financial ecosystem. CDPQ pledged C$50 million annually over the next five years, with the potential for the contribution to reach a total of C$500 million.
The commitment announced by CDPQ and its co-investors supported the launch of the Evovest Global Market Neutral Fund LP for approximately C$75 million. The global fund is using a combination of long positions and short selling to diversify market risks, while seeking to reduce volatility and achieve a low correlation with traditional equity indexes.
Last week, CDPQ expressed an interest in an ESG-focused investment fund, the Investi Fund, which will be managed by Innocap. CDPQ is one of 10 potential investors that have made expressions of interest totalling C$300 million, with the Investi Fund seeking to achieve C$1 billion in commitments within 24 months. The Investi Fund seeks to support innovative sustainable investment strategies and Québec-based asset management firms specializing in ESG and sustainable finance.
Speaking to Global SWF, which made it Fund of the Year 2022, CDPQ’s CEO Charles Emond said, “Investing in Québec has always been our raison d’être and is not mutually exclusive with our overseas efforts. Our assets in Québec have usually performed very well because it is an ecosystem we know very well. Considering our depositors – which represent about 6 million Quebecers – we have a huge domestic impact and the good thing about Québec’s economy is that it is very well diversified, which plays to our strength as an investor and advisor.