Due to the financial crisis that has been going on for several months, the Caisse de dépôt et placement du Québec should report its worst half-year performance as of June 30 in the last 14 years, that is, since 2009, the first year in which the Caisse he had decided, early in the reign of Michael Sabia, to start publishing semi-annual results.
It should come as no surprise that Caisse’s assets melt by at least 10% during the first six months of 2022.
Specifically, such a 10% drop suggests that the net asset value of the Caisse’s gigantic portfolio would fall by $42 billion, from $420 billion (as of December 31, 2021) to about $378 billion as of June 30. .
The last time the Caisse had posted a negative half-year return was in June 2020. Following the onset of the COVID-19 pandemic and the ensuing global economic crisis, the Caisse had posted a 2.3% loss in the half year to June. 30 Which was pretty modest. The Fund had been “saved” by its investments in fixed income securities (bonds, etc.) which had closed the semester with a rise.
Now, what makes me say that, this time, the Caisse could record a loss of 10% during the first half of the current financial year 2022? I draw on the magnitude of the underperformance of the following financial indices:
- New York Stock Exchange S&P 500: -20.0%
- Toronto Stock Exchange S&P/TSX: -9.9%
- Nasdaq of the New York Stock Exchange: -29.5%
- MSCI Europe: -19.1%
- MSCI Pacific: -15.3%
- MSCI Emerging: -15.9%
- MSCI World: -18.8%
- FTSE Canada Universe Bonds: -12.2%
- FTSE Canada long-term bonds: -22.1%
- FTSE Canada Real Yield Bonds: -17.4%
Another comparison tool that probably gives us a good idea of the potential underperformance of the Fund: the performance of typical pension funds based on different asset allocations that the firm Aubin Actuaire Conseil has compiled for the six-month period to 30 June. By asset allocation, we mean the percentage that bonds and stocks occupy in the benchmark portfolio.
IN THE RED
Note that for an exceptional time, all of the various asset allocation allocations have returned negative returns hovering around -13% for the first six months of the year.
This is how a portfolio composed of 85% bonds (FTSE Canada universe), 7.5% Canadian equities (S&P/TSX) and 7.5% global equities (MSCI world) recorded a half-year loss 12.6%.
And surprisingly, at the end of the asset allocation spectrum, with a portfolio made up of 35% bonds, 32.5% Canadian equities and 32.5% global equities, we would have lost 13.6%.
In the case of a split portfolio, half in bonds and half in stocks, the loss was 13.3%.
LESS THAN A MIRACLE…
Keep in mind that the Caisse’s top management, headed by Charles Emond, could perhaps count on a handful of investments with miraculous returns that would help mitigate the six-month shock to the stock and bond markets.
When I speak of the “miraculous return” that Charles Emond’s portfolio management team managed to achieve, I am referring here to the fabulous return of 39.2% that the Caisse reported in 2021 with its portfolio of private investments in company shares. This also allowed the Caisse to post one of its best ever results, with an overall return of 13.5%.
With its investments in real assets (buildings and infrastructure), perhaps the Caisse has a “happy” surprise in store for us. That remains to be seen…
A SHOCK ABSORBER
During the first half of the year, the only sector that filled the coffers of portfolio managers was energy and its oil companies.
However, the Caisse certainly hasn’t been able to take full advantage of the market’s strong performance in the energy sector, as it agreed last fall to leave it for quarters.
#worst #semester #Fund