Caisse Gains 13.6% in 2010

Via Pension Pulse.

Bertrand Marote of the Globe and Mail reports, Caisse posts 13.6% return:

The
Caisse de dépôt et placement du Québec posted a robust 13.6-per-cent
return on its investments last year, solidifying its ongoing recovery
from a disastrous 2008 loss.

The
results for 2010 beat the 11.25-per-cent median return of large
pension funds in 2010 as estimated by RBC Dexia Investor Services Ltd.

The
Caisse - Canada's largest public pension fund - said it outperformed
its own benchmark index by 4.1 per cent for the year ended Dec. 31,
2010.

At the end of 2010, the Caisse's net assets stood at $151.7-billion, up from $131-billion in the previous year.

The increase was due to net investment results of $17.7-billion plus $2.4-billion in net deposits.

The
Caisse is now almost back to pre-2008 levels. It posted a staggering
25-per-cent loss - $40-billion - on its investments in 2008.

Last year, the Caisse had a 10-per-cent return, below the 15.48 per cent median return of its peers.

“In a year marked by turbulence, Europe's sovereign debt crisis and
fears of a slowdown in the U.S., the Caisse generated strong results on
many fronts,” Caisse chief Michael Sabia said in a news release
Thursday.

“Our teams successfully repositioned the Caisse to
focus on its core business and select quality holdings, while managing
the portfolios prudently to take advantage of hard-to-predict market
conditions.”

Real estate,
infrastructure and bonds - one of three major asset classes at the
Caisse - turned in a 16.3 per cent return in 2010, while equities
delivered a 14.6 per cent return.

Private equity performed particularly well, with a 26.7-per-cent return.

Infrastructure alone posted a 25.4-per-cent return.

But Canadian equities underperformed. The Canadian equity portfolio
generated a 15.7-per-cent return, 1.9 per cent below its benchmark. The
results were largely due to the portfolio's being overweight in
large-cap companies and the dramatic outperformance of small-caps in
2010, the Caisse said.

"The Caisse is back in good health. We
have rejoined the race. But the race is a marathon. The race is not a
sprint," president and chief executive officer Michael Sabia said at a
news conference after the results were unveiled.

The Caisse provides a full press release and combined financial statements
on its website covering the 2010 results. The annual report will be
available in April but the press release contains all the relevant
information on performance. A summary of the results is provided below (additional information is available here):

The
performance in private markets was very strong, but so was that of
public markets, especially Fixed Income. Key points from the release:

• The Bonds portfolio achieved an 8.4% return, 1.6% above its benchmark index.
  The drop in rates of government bonds, with maturities of five years or
  more, and the additional yield on corporate bonds, relative to
  government securities, accounted for most of these results.
• The
  Real Estate Debt portfolio also benefited from declining rates, posting a
  17.1% return. Falling mortgage rates in Canada, the U.S. housing market
  recovery and the sale of U.S. assets, conducted as part of the
  portfolio refocusing announced in 2009, largely explain the performance
  of the portfolio, which outperformed its benchmark index by 10%.
• The Real Estate portfolio achieved a 13.4% return, outperforming its benchmark index by 1.8%.
  This performance is mainly due to the strong performance of retail
  properties in Canada and office buildings in Canada, the U.S. and
  Europe.
• The 25.4% total return of the infrastructure portfolios
  for the year is due to the resilience of energy assets in the face of
  market turbulence and the recovery of airport service assets after the
  financial crisis. These portfolio assets possess strong fundamentals
  that have improved throughout the year.
• In total, the Equity
  portfolios represent $72.4 billion, approximately 48% of the Caisse’s
  net assets, including $19.3 billion in the Canadian Equity portfolio,
  $14.3 billion in our Global Equity and Québec International portfolios,
  $21.3 billion in international stock market index portfolios and $17.5
  billion in the Private Equity portfolio.
• The Canadian Equity portfolio generated a 15.7% return, 1.9% below its benchmark.
  This underperformance is primarily due to the portfolio’s overweight on
  large-capitalization companies with strong fundamentals and the dramatic outperformance of small-cap companies in 2010.
• The
  Global Equity and Québec International portfolios slightly outperformed
  their benchmark indexes, with returns of 7.3% and 14.0%, compared to
  index returns of 7.0% and 13.7%, respectively. These results reflect the
  strength of international markets and timely active management picks in
  energy, industrials and consumer goods.
• The index-managed U.S.
  Equity, Foreign Equity and Emerging Markets Equity portfolios produced
  returns in line with their benchmark indexes.
• The Private Equity portfolio, which achieved a return of 26.7%, significantly benefited from the global recovery in mergers and acquisitions
  and the rebound of financings in this area. The sharp rise in asset
  valuations during the year mainly reflected improvements in operating
  performance, debt reduction and an increase in the profitability of
  Private Equity portfolio companies. Accordingly,
  more than two thirds of the 2010’s return is the result of activities
  in leveraged buyout and development financing.

Importantly, on operating expenses, the press release states the following:

• In
  2010, the Caisse continued to improve its efficiency, paying close
  attention to its operating expenses and external management fees. As a
  result, it achieved its budgetary reduction goal of $20 million
  announced in spring 2010. Achieving
  this objective enabled the Caisse to continue to decrease total
  operating expenses and external management fees, which stood at $269
  million in 2010. The ratio of operating expenses to total assets
  therefore decreased from 22 basis points (bp) in 2009 to 19.4 bp in
  2010, a level that compares favourably to best-in-class manager standards.

Finally, the press release quotes Michael Sabia, President and CEO of the Caisse:

"There
are many uncertainties remaining: the situation in North Africa and the
Middle-East is evolving rapidly and the sovereign debt crisis in Europe
has not been resolved. Moreover, in the United States, employment
levels stagnate, the housing crisis persists and, at the same time, the
exit strategy for expansionary monetary and fiscal policies is far from
finalized," said Mr. Sabia.

"We posted solid results in 2010, but we know we have much work to do to provide good long-term returns to our depositors — given the current uncertainty and market volatility that will prevail in the coming years," added Mr. Sabia.

This is the consistent message Mr. Sabia has been delivering ever since
he took the helm after the 2008 disaster. Despite the solid performance,
he knows there is a lot of work ahead and now is not the time for
complacency. His senior team and the employees have been instrumental in
helping the Caisse achieve these strong results in a year that wasn't
particularly easy. 2011 will prove to be even more difficult.

The Caisse is
the first of the large Canadian pension funds to announce their 2010
results. Others will announce in the weeks ahead. They got a tough act
to follow. For those of you who speak French, you can watch this RDI interview with Michael Sabia.

Comments

[I am a Man I am...]

my mattress would have performed better since 2007

[BigDuke6]

Its suddenly come to me about how things have really gone to shit in the last 15 to 20 years.
This is the reason why some of the anger in the forum is so heartfelt.

It really should have turned out better.
the predatory class have had it their own way for so long.
even less than 100 years ago they had us 'doffing' out hats to them in respect
my great grandma was a house maid.
time passed....
and we thought we had it right - the middle class was living it large
so
people got too greedy then the banksters and the stupids have fucked it all for everyone.

to purge it clean requires more grit than anyone near power has, the politicians have sold us down the river.

Fuck me thats gotta hurt.

[Bicycle Repairman]

As long as QE continues, the "Caisse" should continue to show gains.  If it ends and the manipulation of the market ends, I predict real problems for the "Caisse".

[nmewn]

"The Caisse is now almost back to pre-2008 levels. It posted a staggering 25-per-cent loss - $40-billion - on its investments in 2008."

A 25% loss of principle requires a 50% gain just to get back to even on it...we'll leave the "natural" erosion of currencies aside and the time value of same.

Now I'm off to earn something slightly more tangible for my time...LOL.

Carry on professional money manager...and solar stock speculator ;-)

[falak pema]

Modesty and prudence in fiduciary management are cardinal virtues.

[Fíréan]

Thank You posting this, an interesting read.I do feel that the following quote is a part which ought be high- lighted:

In 2010, the Caisse continued to improve its efficiency, paying close attention to its operating expenses and external management fees.

special emphasis on the  "external management fees."

[Leo Kolivakis]

Duly noted, I bolded that sentence and you're welcome.

[Howard_Beale]

Can't wait for their 2011 performance figures. :) STFD.

[AnAnonymous]

That looks interesting.

[pitz]

Why did their equity portfolio underperform the market so badly?