Worst semester in 50 years in the markets: the big head of the CDPQ tries to be reassuring

Worst semester in 50 years in the markets: the big head of the CDPQ tries to be reassuring

Stock market crash, inflation, fears of economic slowdown, war in Ukraine, the Caisse de Depot et Placement du Québec (CPDQ) had to navigate rough seas during the “worst semester in 50 years in the markets”, but the big boss Charles Emond However, he wanted to be reassuring.

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“We never want that, a negative return, that’s for sure, but we don’t control the environment we’re in. […] But the savings bank has a robust portfolio, we are on solid foundations and so are our depositors,” he said in an interview with The newspaper.

The institution posted a return of -7.9%, which is however above its benchmark by -10.5%. We have to go back to the 2008 financial crisis to see such a steep drop in the CDPQ, but the drop had been much larger (-25%).

With this foray into the red, the institution’s assets now stand at $392 billion, a drop of more than $28 billion since the end of 2021.

“It is sure that it is a large figure, but they are not materialized losses, it is much better than the average of the pension funds that are at -14%-15%”, Emond stressed.

storm in the markets

These results for Quebecers, however, are lower than a comparable one, the Ontario teachers’ pension plan, Teachers, which revealed a positive return of 1.2% for the first half.

“With Teachers, the big difference is that they have maybe 9-10% of the stock market, while we and the other peers have 25-30%,” the executive explained.

The storm hit nearly every sector, including stock and bond markets, which experienced their first simultaneous correction since 1969.

“This unusual context, marked by instability, will continue for some time,” warned Mr. Emond.

Therefore, the equity portfolio was severely affected and the yield plummeted 16%, which however is above its benchmark portfolio by -17.2%.

The situation could pick up as stock markets have risen in recent weeks.

“July was the best month in almost two years for the equity markets,” Mr. Emond explained.

With inflation and rates rising rapidly, the bond market struggled, hitting the fixed income portfolio (which includes bonds) with a negative return of 13.1%.

Other portfolios performed better, highlighting private placements (shares of companies that are not listed on the stock exchange) where the return was -2.4%, the real estate sector (+10.2%) and the infrastructure sector (+5, 8%).

The $200 million in Celsius canceled

In addition, Mr. Emond made his mea culpa in the case of the collapse of Celsius Network in which he already considers that he has lost everything.

“Don’t get me wrong, no one at Caisse is happy with the turn of events,” he said.

In July, the American company took shelter from its creditors. In documents filed in a New York court, he attributed his insolvency to “bad decisions” in investment. No fewer than 1.7 million individual investors paid the price.

The executive president also acknowledged having made the decision to cancel the Caisse’s investments in this company. This cancellation is valued at US$150 million (approximately C$200 million).

The CDPQ also indicated that it is analyzing the legal resources in the case.

A difficult start to the year for the Caisse

  • Semi-annual return as of June 30: overall -7.9%
  • Stock markets: -16.0%
  • Fixed rent: -13.1%
  • Private placements: -2.4%
  • Infrastructure: +5.6%
  • Buildings: +10.2%

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