Canadian pension fund manager Caisse de Depot et Placement du Quebec, Montreal, posted a 9.4% return last year as gains from its investments in private equity and stocks offset losses in real estate.
The overall return, which fell below its benchmark of 11.8%, brought the pension fund’s net assets to C$473 billion ($329 billion) as of Dec. 31.
“Our performance was driven by our equity market, private equity and infrastructure activities,” CEO Charles Emond said in a statement. He added that returns were “affected by persistent headwinds in real estate, particularly in the U.S. office sector.”
Private equity returned 17.2% amid growth in the portfolio companies, particularly in the industrials and consumer goods sectors. CDPQ’s public equity portfolio fared better, returning 25.5% and topping its benchmark of 24.1% in what was a sizzling year for stocks.
CDPQ’s real estate investments delivered a 10.8% loss, mainly because its office portfolio is heavily concentrated in New York and Chicago, two hard-hit cities. That performance is worse than the segment’s 2023 loss of 6.2% and is the third loss in five years.
The CDPQ is moving toward being an investor in real estate rather than being an operator, Emond told reporters in Montreal, adding that he’s looking for more liquidity and partners in the segment.
He expects the real estate portfolio to eventually outperform its benchmark as the fund implements improvement measures in the next 18 to 24 months. The CEO acknowledged that would be a huge undertaking.
Canada’s second-largest pension fund is leaning toward reducing its exposure to real estate while also focusing on repositioning the portfolio.
“The reality is it’s not so much the percentage of what we own that’ll be the main driver, but rather how do we invest it,” Emond said in an interview. The pension fund manager aims to be a net seller of offices and will deploy a majority of real estate capital into new sectors such as logistics, including warehouses and self-storage, he added.
CDPQ expects uncertainty and volatility to continue this year as the U.S. administration implements drastic changes, including imposing tariffs on neighboring countries, as well as Europe and China. Around 5% to 6% of the pension fund manager’s overall portfolio would be directly impacted by tariffs, according to Emond.
Domestically, CDPQ deployed C$4.3 billion in new investments and commitments, increasing its assets in Quebec to C$93 billion. The pension fund manager expects to reach C$100 billion in 2026 as planned.
Some of its investments in the province last year included a C$500 million investment to support National Bank of Canada in acquiring Canadian Western Bank and a C$158 million investment in WSP Global to help it buy U.S.-based Power Engineers.
Northvolt write-down
The pension fund wrote down its $150 million investment in Northvolt to zero, said Kim Thomassin, executive vice president and head of Quebec at CDPQ, told reporters. The electric vehicle battery maker filed for bankruptcy protection last year.
Canada’s largest pension plans poured money into the Swedish firm, which announced plans in 2023 to build a factory not far from Montreal to serve auto companies in the North American market. The C$138.2 billion Ontario Municipal Employees Retirement System, Toronto, made three major investments, according to a LinkedIn post last year. The C$699.6 billion Canada Pension Plan Investment Board, Toronto, and the C$77 billion Investment Management Corp. of Ontario, Toronto, also allocated money to Northvolt.
IMCO wrote down its $400 million investment, Bloomberg reported earlier this month, joining investors such as BlackRock and the 718 billion Danish kroner ($99.4 billion) pension fund ATP, Hilleroed, in that move.
