The real assets portfolio of Caisse de depot et placement du Quebec (CDPQ) outperformed its benchmark by 6.5 percentage points in 2023, after a strong performance in its infrastructure portfolio helped offset negative returns from real estate.
The Canadian institution’s C$59.8bn (€40.5bn) infrastructure portfolio at the end of 2023 generated a 9.6% return against the index’s 0.3%, with the C$45.6bn real estate portfolio recording a -6.2% return against the benchmark’s -10% during the same period ending 31 December.
The real assets portfolio, which is composed of the real estate and infrastructure portfolios, recorded a one-year return of 2.2% compared with the benchmarks -4.3% return at the end of 2023.
CDPQ, which placed second on the IPE Real Assets Top 100 infrastructure investors 2023 rankings, said assets in essential sectors such as transportation and renewable energy were among the performance drivers.
“With slower transaction activity in 2023, the team remained disciplined in managing its portfolio, both in selecting acquisitions and in sales and syndication activities,” it said.
The market was more difficult for real estate in 2023, which is reflected by the benchmark index’s -10% one-year return.
“Despite economic challenges and structural issues in some sectors such as offices, the real estate portfolio demonstrated more resilience, and the repositioning toward promising sectors such as logistics that began in 2020 mitigated the decrease in value. As such, the portfolio recorded a -6.2% return for one year, above its index,” the Canadian investor said.
In 2023, teams remained selective in the slowest transactional market in 15 years, with acquisitions in promising sectors of the future aligned with the portfolio’s evolution, as well as disciplined dispositions, CDPQ added.
Over five years, real estate’s annualised return was -0.5%, compared with 0.8% for the index, notably due to the portfolio’s overweighting in Canadian shopping centres at the beginning of the period.
“The strategic repositioning over the last few years, which represented around 300 transactions totalling over C$50bn, is nevertheless bearing fruit: since the pivot, C$5.5bn in value-added has been generated compared with the benchmark index,” it said.
Earlier this year, CDPQ announced the integration of its real estate subsidiaries Ivanhoé Cambridge and Otéra Capital, a move it said will ”enable greater focus on investment expertise and generate agility and efficiency gains”.
Ivanhoé Cambridge placed seventh on the IPE Real Assets Top 150 real estate investors 2023 rankings.
CDPQ’s overall C$434bn (€294.3bn) portfolio, which includes fixed income and equities, recorded a return of 7.2% in 2023 compared with the benchmark portfolio’s 7.3% return.
Charles Emond, president and CEO of CDPQ, said 2023 was marked by highly volatile bond markets and a historic concentration of gains from a handful of US tech stocks that drove the main stock indexes.
“Faced with this context, our portfolio performed well, and our depositors’ plans continue to be in excellent financial health.”
Emond added: “Since 2020, investors have had to weather market conditions that ranged from one extreme to the other. In such environments, our portfolio has grown by nearly C$100bn over the period. We may reach a crossroads in the year ahead, with many central banks likely to pivot, but the scope and sequence remain unknown.
“With a backdrop of downward but persistent inflationary pressure combined with lingering volatility, our portfolio remains well positioned to keep delivering the long-term returns our depositors need.”
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