In the past few years, CDPQ has consolidated its position as one the world’s largest PPFs, and as the world’s second largest state-level fund. The investor has grown its global footprint through ten offices outside of Québec and was the third most active SOI in private markets during 2020. We had the immense pleasure to talk to Ms. Maarika Paul, EVP and CFOO, about CDPQ’s current status, focus and future strategy.
[GSWF] Analysts tend to put all Canadian Funds into the same bucket, but the reality is that they are all different. How do you define yourselves at CDPQ?
[CDPQ] CDPQ is unique in the sense that it has a dual mandate: to optimize commercial returns for our clients, and to contribute to the economic development of Québec. We work closely with each of our 40 depositors to identify their investment needs, risk and return profile, and preference over the ten different portfolios we run. That adds some complexity to our mandate and differentiates us from some of our peers.
[GSWF] How do you ensure a good balance between your Québec investments and the rest of your portfolio?
[CDPQ] Investments in Québec represent circa 17% of our portfolio and have always done very well for us, given our market insights. However, like any investor, we must pursue an appropriate level of diversification and have c.68% of our portfolio out of Canada now.
[GSWF] Where do you see growth and how do you see your asset allocation evolving in the next few years?
[CDPQ] Infrastructure is going to be the portfolio where we will see the largest growth in the next 3-4 years. We also expect our rates and credit portfolios to ramp up including RE debt. Private Equity and Real Estate are probably at the level we want them to be at the moment, with the pandemic accelerating the implementation of Ivanhoé Cambridge’s (real estate subsidiary of CDPQ) action plan including a reduction in commercial shopping centers and an increase in industrial and logistics properties.
[GSWF] Can you walk us through the rationale of setting up CDPQ Global and what has changed since then?
[CDPQ] CDPQ Global has not dramatically changed our previous strategy – Growth vs Developed Markets – but we felt that Developed Markets were left a bit on their own. The idea now is to promote a more cohesive global presence, incl. our offices in NYC, London, Paris and Sydney; to position ourselves as a partner of choice; and to help our teams with local dynamics and regulations.
[GSWF] Putting your COO hat on, what are your views regarding CDPQ’s current structure?
[CDPQ] We expect to increase our staff in Infrastructure, given our plans for the asset class. We also expect more rotation of staff in between offices and markets and leveraging more our operational partners. Lastly, we are hiring “jobs of the future” that are experts with Big Data, AI and Tech. We appointed a CTO – not to create a separate VC fund like some of our peers – but to identify opportunities related to Tech and to fully leverage digital technology that will enhance our agility and performance.
[GSWF] How did the CAD 4 billion pandemic envelope that was established last year work out?
[CDPQ] This was designed for successful businesses that struggled throughout the pandemic and it was well received. We are also leading other initiatives and recently launched an aid program to help SMEs adopt a digital business culture in their organization.
[GSWF] You are one of the few female executives at the top of an SOI. How do you see diversity evolving at CDPQ?
[CDPQ] We just approved a new diversity and inclusion policy that embraces a number of elements around ethnicity and gender. The biggest challenge of female leadership has often been on the investment side. However, we are working on removing unconscious biases and being progressive. The Head of our Equities team and Private Equity business in Québec – as well as our real estate subsidiaries Ivanhoé Cambridge and Otéra Capital – are all women; but we know we still have work to do here.
[GSWF] Finally, can we talk a little bit about ESG, where CDPQ has been a trailblazer and advocate?
[CDPQ] We were one of the first funds to align our employees’ variable compensation with our carbon footprint reduction objectives. Since 2017, we have increased our low-carbon portfolio by 95% and reduced our carbon intensity by 21%, exceeding all our targets. We are fortunate to have a fairly young staff base that are aware of how pressing climate change is and take it very seriously. We want to continue our global leadership and participate in the Net Zero Asset Owner Alliance as well as co-founded the Investor Leadership Network – just two examples. We recently contributed to a guide on the impact of climate change on valuations produced by A4S and CPA Canada and we are currently discussing with IFRS mechanisms for capturing and better reporting ESG KPIs. ESG will certainly be one of our key areas of focus going forward as we invest constructively to generate sustainable returns over the long term.