The Canadian public pension fund Caisse de dépôt et placement du Québec (CDPQ) reported a mid-year return of 5.6% for end-June, outperforming its benchmark return of 4.4% due to robust performance in real assets and bringing net assets to C$390 billion (US$304 billion).
Real assets grew 4.1% against a benchmark of 0.4%, while returns on equity were a shade above the benchmark at 12.1% and the return on fixed income was -1.8% compared to the -2.0% benchmark return. The fund’s annualized 10-year return reached 8.8%, which was 50 basis points above its benchmark.
According to CDPQ, the return in real assets was driven by new economy assets, such as logistics, renewable energy and telecommunications. The real estate portfolio generated a 4.1% return for the six-month period compared to the -0.9% of its benchmark index, while for infrastructure the portfolio earned a 3.9% return for the period, compared to 1.9% for its benchmark index.
The fund stated that “this result notably stems from the good performance of assets in the wind and solar energy sector.” Yet, for the five-year return, the yield was disappointing due to the historical allocation to shopping centres and offices, which were hit by the pandemic; the five-year real assets return was an annualized 4.6% compared to the 6.2% benchmark.
Earlier this year, Maarike Paul, CDPQ’s Chief Finance and Operations Officer, told Global SWF: “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 action plan including a reduction in commercial shopping centres and an increase in industrial and logistics properties.”.
Sure enough, Global SWF data show that logistics and industrial real estate was the biggest single target in H121 representing 27% of total investment in real assets, followed by telecommunications infrastructure (24%). Overall investment in real assets totalled US$5.7 billion in the year to date.
CDPQ continues to focus on evolving its real assets strategy with the first half seeing its participation in a US$1.2 billion port development in Indonesia and involvement in the country’s infrastructure investment platform. Also in the infrastructure sector, the fund was involved in the telecommunications towers sector with the acquisition of ATC Europe.
In the real estate sector, CDPQ’s real estate subsidiary, Ivanhoé Cambridge, will focus on orienting towards exposures in logistics, technology and life sciences with the highlight being its partnership with GID Industrial, which targets logistics assets serving the “last mile”.