Caisse Gains 12% in 2014

Ross Marowits of the Canadian Press reports, Caisse de dépôt sees softer stock market ahead after generating 12% return in 2014:
The years-long bull run on equity markets that helped the Caisse de dépôt et placement du Québec generate a 12% return in 2014 is running out of steam and will require careful watching going forward, CEO Michael Sabia said Wednesday.

“We’re certainly not calling for a big correction…but it’s going to be increasingly difficult to replicate the kind of returns that we’ve seen everywhere basically since 2009,” Sabia told reporters in discussing the Quebec pension fund manager’s 2014 results.

That means the Caisse must continue to invest defensively in high quality assets, including real estate and infrastructure that have generated strong returns, he said.

Chief investment officer Roland Lescure said the double-digit returns of the past four to five years will end.

“In the next five years we should expect single-digit returns with double-digit volatility and that requires quality, quality, quality, but also the ability to be opportunistic.”

The large institutional investor said its assets as of Dec. 31, 2014, were $225.9 billion, even though investment return slowed slightly from 13.1% in 2013.

All three of the Caisse’s major asset classes experienced gains, led by equities which had a nearly 14% return as assets rose to $106.9 billion. Inflation-sensitive investments had an 11 per cent return, while fixed-income investments increased 8.4%.

Sabia described the Caisse’s performance as “solid,” considering currency fluctuations, low interest rates and falling oil prices near year-end.

“Despite the volatility, we showed our resilience. We have stayed the course and that’s what counts.”

Its real estate division, Ivanhoe Cambridge, completed a record number of transactions in 2014 as shifted focused from hotels to multi-residential and logistics properties. It made acquisitions valued at $5.1 billion and sold properties worth $8.6 billion, including 21 hotels.

The division generated $2.1 billion of net investments in 2014 as its assets grew to $22.9 billion.

The Caisse’s infrastructure portfolio has more than doubled in four years to $10.1 billion, including $1.3 billion invested in 2014, when it enjoyed a 13.2% annual return.

Sabia expects new investments will more than double the infrastructure portfolio again in the next few years as the Caisse creates a new subsidiary that will fund and build projects in Quebec and chase opportunities in the United States and elsewhere abroad.

“It is probably fair to say our No. 1 global priority is to substantially expand our infrastructure presence in the United States, where we think the needs are great,” he said.

The Caisse invested $2.5 billion in Quebec companies last year and more than $11 billion over four years, pushing its assets in the province to $60 billion.

However, it shifted five per cent of its Canadian exposure to other markets to capitalize on global growth. More than 47% of its investments are outside the country.

Meanwhile, Sabia said the Caisse continues to have faith in two troubled Quebec companies — SNC-Lavalin (TSX:SNC) which faces bribery and corruption charges, and Bombardier (TSX:BBD.B) which is seeking new liquidity.

Sabia said SNC-Lavalin has made big ethics changes and is not the same company it was a few years ago. The Caisse has maintained its level of investment in the embattled engineering firm at about 10%.

The Caisse also took advantage of Bombardier’s recent nearly $1-billion equity offering to increase its $271-million stake in the airplane and rail equipment manufacturer, but didn’t say by how much.
Nicolas Van Praet of the Globe and Mail also reports, Caisse eyes ‘substantial infrastructure opportunities’ in the U.S.:
Caisse de dépôt et placement du Québec has already helped Canadian investors become the single largest foreign buyer of U.S. commercial real estate since 2010.

Now, the Caisse has its eye on another big bet south of the border: infrastructure, from airports to bridges.

Canada’s second-largest pension fund is aiming to double its current $10-billion infrastructure portfolio over four years and believes a significant portion of that growth will come from the United States.

“We think there are very, very substantial infrastructure opportunities in the United States,” chief executive Michael Sabia told reporters in discussing the pension fund’s 12-per-cent return for 2014. “In geographic terms, this would be priority one.”

As part of a transformative deal announced last month with Quebec giving the Caisse new powers to develop major infrastructure projects in the province, the pension fund is carving out a new subsidiary to handle such investments. It hopes to parlay the Quebec model, based on easing the financial load on government, to other parts of the world.

The Caisse has slowly been ramping up its infrastructure exposure in the U.S. Recent investments include a $600-million commitment for a roughly 30-per-cent stake in electricity supplier Indianopolis Power & Light Co. It also holds a 16-per-cent interest in U.S. petroleum pipeline Colonial and is said to be among a group being solicited to bid for natural gas pipeline operator Southern Star Central Corp.

But, ever searching for investments that generate long-term stable cash-flow, it wants more.

“There is a significant demand and need for infrastructure investment in the U.S., in particular in the transport sector,” said Macky Tall, who leads the Caisse’s infrastructure business. “Many roads and bridges are in need of being repaired and renewed.”

Despite the historic reluctance of the U.S. government to open up the country’s physical assets to private investors such as the Caisse, President Barack Obama’s administration has recently shown more openness in light of the strained finances of many state governments. As U.S. Transportation Secretary Anthony Fox said last year in announcing the Build America Investment Initiative: “The reality is we have trillions of dollars internationally on the sidelines that are not being put to work.”

Mr. Sabia has been executing a strategy of boosting investments in tangible assets such as real estate and infrastructure while focusing on public equities it sees as high-quality and less risk. The aim is to generate even and predictable results at a time when equity markets remain erratic and low yields are expected to continue in bond markets.

Last year’s 12-per-cent return was powered by strong gains in U.S. stock holdings. The Caisse’s global equity portfolio in particular, which invests in large-cap companies, returned 18.5 per cent as those multinationals tapped into growth in the U.S. consumer market and the economy in general.

Asked if public equity markets are overheated, Mr. Sabia noted that efforts companies have made on cost-cutting have fuelled an improvement in corporate profits of late. He said that can’t continue forever and that companies will need to generate revenue growth eventually.

“We’re not calling for a big correction in the markets,” Mr. Sabia said. “Our sense of this is, yeah the elastic is stretched pretty tight. And we’re very conscious of that. That doesn’t lead us to believe things are going to snap tomorrow. But we’re very vigilant about it.”

With a stake of about 10 per cent, the Caisse remains a major investor in SNC-Lavalin Group Inc. Mr. Sabia said the pension fund continues to back the engineering company’s efforts to win new business and put its ethics scandal behind it, even in light of new corruption charges laid by the RCMP last week.

“The fact that we haven’t changed our position, I think, speaks clearly about what we think about the current situation,” Mr. Sabia said.

Returns over the past four years under Mr. Sabia’s watch have totalled 9.6 per cent. His five-year term as CEO was extended in 2013.
Third, Ben Dummett of the Wall Street Journal reports gains in U.S. stocks helped the Caisse generate a 12% return:
Canada’s second-largest pension fund said it generated a 12% return last year, led by gains in U.S. stocks, eclipsing the fund’s internal benchmark by a small margin.

But Caisse de dépôt et placement du Québec isn’t convinced the strong run in U.S. equities will continue this year, citing stretched valuations.

The Quebec pension fund said net assets totaled 225.9 billion Canadian dollars ($180.8 billion) at the end of December, up from about C$200 billion at the end of 2013. That placed the fund, which manages pension money for much of Quebec’s workforce, behind CPP Investment Board, which had C$238.8 billion of assets under management at the end of December.

Caisse’s 12% return also edged out a 11.4% gain in the fund’s benchmark. Canadian pension funds typically measure themselves against an in-house index to reflect the diversity of public and private asset classes in which they invest.

The latest results come as the fund has moved away from investments that mirror benchmark indexes in favor of focusing more on concentrated portfolios of public and private holdings that are meant to generate steady returns. The goal is to reduce the fund’s exposure to market volatility while take better advantage of global economic growth.

“A big part of the strategy…is to be able to outperform on the downside,” something Caisse hasn’t managed well historically, Chief Executive Michael Sabia said in a phone interview.

Caisse’s public and private-equity holdings generated the biggest return among its investments, gaining 13.9% compared with 12% for the benchmark. Within that group, U.S. equities fared the best, posting a 24% return as major U.S. stock indexes rose amid growing confidence in the U.S. economy.

The weaker Canadian dollar measured against its U.S. counterpart would have also helped boost the pension fund’s U.S. equity returns after converting the U.S. dollar gains back into Canadian currency.

But the fund is more leery of the outlook for U.S. equities since stock valuations relative to corporate earnings growth are near record highs.

“The market is suddenly more vulnerable than it has been,” Roland Lescure, the fund’s chief investment officer, said in the same phone interview.

Caisse also splits its assets among fixed income and so-called inflation-sensitive investments, including real estate, infrastructure and real return bonds. The fixed-income portfolio performed largely in line with its index, but inflation-sensitive investments led by infrastructure holdings underperformed.

Infrastructure holdings, which appeal to pension funds because of the steady income they generate, also lagged behind Caisse’s benchmark over the last four years.

Caisse said its infrastructure return for 2014 exceeded its long-term target. The pension fund measures its infrastructure holdings against a benchmark of 60 public securities even though many of its infrastructure holdings aren’t listed on a stock exchange, making an accurate comparison more difficult.

According to the fund, 75% of the index’s four-year return stemmed from rising equity markets, while dividend income generated by the index-member companies accounted for 25% of the benchmark’s return.

“The Caisse will continue to make significant investments in infrastructure, particularly in Québec, the United States and in growth markets,” the pension fund said in a statement. “This asset class is central to its investment strategy, especially in an environment of low interest rates and greater volatility in the equity markets.”
Finally, Scott Deveau of Bloomberg reports, Caisse's Sabia Says Stock Markets Will `Run Out of Gas':
The double-digit gains global stock markets have experienced in the past few years can’t continue much longer, and more modest gains are in store, said Michael Sabia, the head of Canada’s second-largest pension fund.

“It’s going to run out of gas,” said Sabia, chief executive of the Caisse de Depot et placement du Quebec, in an interview in Montreal.

The Caisse has benefited from the run-up in stock prices, in particular in the U.S., coming out of the recession. The Montreal-based pension fund posted an overall return of 12 percent in 2014 on its investments, fueled by an increase in its equities portfolio. Over the past five years, its overall return on its investments has averaged 10.4 percent annually.

Sabia said a more realistic annual return would be in the single digits once the public equity markets cool, although he cautioned he didn’t know when that will be.

The bulk of gains in corporate profitability, in particular among U.S. multinationals, have come from cost cuts, he said. Companies will have to boost sales too, for the Standard & Poor’s 500 Index to continue rising.

The Caisse isn’t forecasting a massive correction. Instead, single-digit returns are a more likely scenario, he said. The fund had C$225.9 billion ($182 billion) in total assets at the end of 2014, compared with C$200 billion a year earlier.

Quebec Retirement

The pension fund, which oversees the retirement savings of those living in Quebec, is a prominent investor in infrastructure, real estate, public and private equity worldwide. The fund is looking to diversify its portfolio globally and will pursue opportunities in the U.S., Australia, and Mexico, Sabia said. It will also be exploring some opportunities in India and Europe.

The Caisse has shifted about 5 percent of its exposure in Canada to other markets in the past four years and currently has about about C$117 billion, or 47 percent of its investments, outside of the country. That’s up from C$72 billion in 2010.

Sabia also took the opportunity to defend two embattled Quebec companies the Caisse is currently invested in: SNC-Lavalin Group Inc. and Bombardier Inc.

The Caisse is SNC-Lavalin’s largest shareholder with about 10 percent of its outstanding common shares. SNC-Lavalin was charged last week with attempted bribery and fraud related to construction projects in Libya and said it would vigorously defend itself against the charges, which it said involved employees who left “long ago.”

Governance Changes

SNC-Lavalin has made great strides in corporate governance as it moves to distance itself from a scandal over improper payments that led to the departure of its former CEO Pierre Duhaime three years ago, Sabia said. The Caisse has not altered its investment in SNC-Lavalin after the last charges and supports the board’s efforts to improve its governance.

“The SNC-Lavalin today is not the SNC-Lavalin of five or six years ago,” he said.

Bombardier issued C$938 million in new equity last week to help cover the cost overruns of its CSeries jet program. The Caisse participated nominally in the raise, just a “top up” of its existing investment, Sabia said.

It will also consider investing in whatever debt offering the company might consider, he said.

“They managed to do a pretty big equity offering. Given that and whatever debt they’re going to do, they’re going to come out of this period with a dramatically changed balance sheet,” Sabia said. “I think the runway is there for them.”
You can gain more insights on the Caisse's 2014 results by going directly on their website here. In particular, the Caisse provides fact sheets on the following broad asset classes:
Keep in mind that unlike other major Canadian pension funds, the Caisse has a dual mandate to promote economic activity in Quebec as well as maximizing returns for its depositors.

In fact, the recent deal to handle Quebec's infrastructure needs is part of this dual mandate. Some have criticized the deal, questioning whether the Caisse can make money on public transit, but this very well might be a model they can export elsewhere, especially in the United States where CBS 60 Minutes reports infrastructure is falling apart.

Whether or not the Caisse will be successful in exporting this infrastructure model to the United States remains to be seen but if you follow the wise advice of Nobel laureate Michael Spence on why the world needs better public investments, public pensions investing in infrastructure could very well be the answer to a growing and disturbing jobs crisis plaguing the developed world.

As far as the overall results, they were definitely solid, with all portfolios contributing to the overall net investment of $23.77 billion (click on image below):

Of course, what really matters is value-added over benchmarks. After all, this is why we pay Canadian pension fund managers big bucks (some a lot more than others). 

In fact, in its press release, the Caisse states in no uncertain terms:
"[its] investment strategy centers on an absolute return approach in which investment portfolios are built on strong convictions, irrespective of benchmark indices. These indices are only used ex post, to measure the portfolios’ performance. The approach is based on active management and rigorous, fundamental analysis of potential investments."
I've already discussed life after benchmarks at the Caisse. So how did their active management stack up? For the overall portfolio, the 12% return edged out the fund's benchmark which delivered an 11.4% gain, adding 60 basis points of value-added last year (do not know the four year figure).

Below, I provide you with the highlights of the three main broad asset classes with a breakdown of individual portfolios (click on each image to read the highlights):

Fixed Income:



Some quick points to consider just looking at these highlights:
  • Declining rates helped the Fixed Income group generate strong returns in 2014 but clearly the value-added is waning. In 2014, Fixed Income returned 8.4%, 10 basis points under its benchmark which gained 8.5%. Over the past four years, the results are better, with Fixed Income gaining 5.6%, 70 basis points over its benchmark which gained 4.9%. Real estate debt was the best performing portfolio in Fixed Income over the last year and four years but on a dollar basis, its not significant enough to add to the overall gains in Fixed Income.
  • There were solid gains in Inflation-Sensitive assets but notice that both Real Estate and Infrastructure underperformed their respective benchmarks in 2014 and the last four years, which means there was no value-added from these asset classes. The returns of Infrastructure are particularly bad relative to its benchmark but in my opinion, this reflects a problem with the benchmark of Infrastructure as there is way too much beta and perhaps too high of an additional spread to reflect the illiquid nature and leverage used in these assets. More details on the Caisse's benchmarks are available on page 20 of the 2013 Annual Report (the 2014 Annual Report will be available in April).
  • In Equities, Private Equity also slightly underperformed its benchmark over the last year and last four years, but again this reflects strong gains in public equities and perhaps the spread to adjust for leverage and illiquidity. U.S Equity led the gains in Equities in 2014 but the Caisse indexes this portfolio (following the 2008 crisis) so there was no value-added there, it's strictly beta. However, there were strong gains in the Global Quality Equity as well as Canadian Equity portfolios relative to their benchmarks in 2014 and over the last four years, contributing to the overall value-added.
If you read this, you might be confused. The Caisse's strategy is to shift more of its assets into real estate, private equity and infrastructure and yet there is no value-added there, which is troubling if you just read the headline figures without digging deeper into what makes up the benchmarks of these private market asset classes.

The irony, of course, is that the Caisse is increasingly shifting assets in private markets but most of the value-added over its benchmarks is coming from public markets, especially public equities.

But this is to be expected when stock markets are surging higher. And as a friend of mine reminded me: "It about time they produced value-added in Public Equities. For years, they were underperforming and so they came up with this Global Quality Equity portfolio to create value."

Also, keep in mind private markets are generating solid returns and as I recently noted in my comment on why Canadian pensions are snapping up real estate:
... in my opinion the Caisse's real estate division, Ivanhoé Cambridge, is by far the best real estate investment management outfit in Canada. There are excellent teams elsewhere too, like PSP Investments, but Ivanhoe has done a tremendous job investing directly in real estate and they have been very selective, even in the United States where they really scrutinize their deals carefully and aren't shy of walking away if the deal is too pricey.
There is something else, the Caisse's strategy might pay off when we hit a real bear market and pubic equities tank. Maybe that's why they're not too concerned about all the beta and high spread to adjust for leverage and illiquidity in these private market benchmarks.

But there are skeptics out there. One of them is Dominic Clermont, formerly of Clermont Alpha, who sent me a study he did 2 years ago showing the Caisse's alpha was negative between 1998 and 2012. Dominic hasn't updated that study (he told me he will) but he shared this:
I had done a study two years ago that showed that the Caisse's alpha was close to -1% and close to statistically significantly different from zero and negative. Part of that regular value lost is compensated by taking a lot more risk than its benchmark by being levered. That leverage means doing better than the benchmark when the markets do perform well, and being in a crisis when the market tanks...
I asked him to clarify this statement and noted something a pension fund manager shared with me in my post on the highest paid pension fund CEOs:
Also, it's not easy comparing payouts among Canada's large DB plans. Why? One senior portfolio manager shared this with me:
"First and foremost, various funds use more leverage than others. This is the most differentiating factor in explaining performance across DB plans. In Canada, F/X policy will also impact performance of past 3 years. ‎It's very hard to compare returns because of vastly different invest policies; case in point is PSP's huge equity weighting (need to include all real estate, private equity and infrastructure) that has a huge beta."
Dominic came back to me with some additional thoughts:
I would love to do proper performance attribution, but I had limited access to data. But we can infer a lot with published data. We do have historical performance for all major funds like the Caisse, CPP, Teachers, PSP, etc. in their financial statements. They also publish the performance of their benchmark.

I agree that because of different investment policies, it is difficult to compare one plan to the next. But we can compare any plan to itself, i.e. its benchmark.

Again, I like to do proper performance attribution in a multivariate framework and that is one area of expertise to me. To do it on a huge plan like the Caisse would require a lot of data which I do not have access to. But a simple CAPM type of attribution would give some insight. In this case, the benchmark is not an equity market as in the base case of CAPM, but the strategy mix of the Caisse.

Thus if we regress the returns (or the excess returns over risk free rate) of a plan, over its benchmark return (or excess over RF rate), we would obtain a Beta of the regression to be close to one if the plan is properly managed with proper risk controls. That is what I obtain when I do this exercise with the returns of a well-known plan – well known for its quality of management, and its constant outperformance.

When I do this for the Caisse, I get a Beta of the regression significantly greater than 1 – close to 1.25. It looks like the leverage of the Caisse over the 15 years of the regression was on average close to 25% above its benchmark! Now part of that as you mentioned and as I explain in my study could come from:
  • Investment in high Beta stocks,
  • Investment in levered Private equity
  • Investment in levered Real Estate and Infrastructure
  • Investment in longer duration bonds
  • Leveraging the balance sheet of the plan: Check Graphic 1 on the link:
It shows the leverage of the Caisse going from 18% in 1998 to 36% in 2008! So my average of 25% excess Beta is in line with this documented leverage.

The chart also shows Ontario Teachers' and OMERS' leverage. The difference is that Teachers' leverage is IN its benchmark, while the Caisse is NOT. Thus the Caisse is taking 25% more risk than its clients' policy mix! You would think that all these clients risk monitoring would be complaining… They are not. 

Of course, that leverage is good when markets return positively and you can see that on the colored chart. But that leverage is terrible when the markets drop 2008, 2002, 2001. When that happen, it is time to fire the management, restart with a new one and blame the previous management for the big loss. Some of those big losses were also exaggerated by forced liquidation accounting (we all remember the ABCP $6 billion loss reserve which was almost fully recovered in the following years inflating the returns under the new administration).

By not doing proper attribution, we are not aware of the continuous loss (negative alpha) hidden by the excess returns not obtained by skilled alpha, but by higher risk through leverage. The risk-adjusted remains negative… And we are not focusing our energies into building an alpha generating organisation with optimal risk budgeting. Why bother, the leverage will give us the extra returns! But that is not true alpha, not true value added.

Which brings me to the alpha of the regression. I told you that this other great institution which does proper risk controls, gets a Beta close to one. They also get a positive alpha of the regression which is statistically significant (t stat close to 2). Not surprising, they master the risk budgeting exercise, and they understand risk controls.

For the Caisse, the Alpha of the regression is close to -1% per year and it is statistically significant. Nobody in the private market could sustain such long period of negative alpha. Nobody could manage a portfolio with 25% more risk than what is requested by the client.

In my report, I also talk about the QPP contribution rate. When Canada created the CPP in the mid-60s, Quebec said "Hey, we want to better manage our own fund." That led to the creation of the Caisse de Depot and it was an excellent decision as the returns of the QPP were much better because they were managed professionally in a diversified portfolio (vs provincial bonds for the CPP). Unnoticed by everyone in Quebec, the contribution rate started to increase in 2012 and will continue to increase up until 2017 at which time Quebecers will pay 9% more than the rest of Canadians for basically the same pension plan (some tiny differences). And the explanation is this negative alpha.

I also explained that with proper risk budgeting techniques at all levels, the Caisse could deliver an extra $5 billion with 20% less risk! Instead of increasing the contribution rate of all CDPQ clients QPP, REGOP, etc., we could have kept them at the same level or lower. And part of that extra $5B return every year would find its way into the Quebec government coffer through reduced contributions and higher taxes (the higher contributions to QPP, Regop, etc. that Quebecers pay are tax deductible…)

For how long are we going to avoid looking at proper attribution? For how long are we going to forfeit this extra $5B per year in extra returns?
I shared Dominic's study with Roland Lescure, the CIO of the Caisse, who shared this with me:
You are right, we have significantly lowered leverage at the Caisse since 2009. Leverage is now solely used to fund part of our real estate portfolio and the (in)famous ABCP portfolio which will be gone by 2016. As you rightly point out, most Canadian pension funds use leverage to different degrees. Further, we also have significantly reduced risk by focusing our investments on quality companies and projects, which are less risky than the usual benchmark-driven investments. And those investments happen to have served us well as they did outperform the benchmarks significantly in 2014. You probably have all the details for each of our portfolios but I would point out that our Canadian equity portfolio outperformed the TSX by close to 300 bps. And the global quality equity portfolio did even better.
I thank Dominic Clermont and Roland Lescure for sharing their insights. Dominic raises several excellent points, some of which are politically sensitive and to be honest, hard to verify without experts really digging into the results of each and every large Canadian pension. Also, that increase in the contribution rate for public sector workers is part of tackling Quebec's pension deficits, slowly introducing more risk-sharing in these plans.

Again, this is why even though I'm against an omnipotent regulator looking at systemic risks at pensions, I believe all of Canada's large pensions need to provide details of their public and private investments to the Bank of Canada and we need to introduce uniform comprehensive performance, operational and risk audits at all of Canada's major pensions.

These audits need to be conducted by independent and qualified third parties that are properly staffed to conduct them. The current auditing by agencies such as the Auditor General of Canada is simply too flimsy as far as I'm concerned, which is why we need better, more comprehensive audits across the board and the findings should be made public for all of Canada's large pensions.

And let me say while the Caisse has clearly reduced leverage since the ABCP scandal which the media keeps covering up, it is increasingly shifting into private markets, introducing more illiquidity risk that can come back to haunt them if global deflation takes hold.

As far as stocks are concerned, I see a melt-up occurring in tech and biotech even if the Fed makes a monumental mistake and raises rates this year (read the latest comment by Sober Look to understand why market expectations of Fed rate hikes are unrealistic). It will be a rough and tumble year but my advice to the Caisse is to stay long U.S. equities (especially small caps) and start nibbling at European equities like Warren Buffett. And stick a fork in Canadian equities, they're cooked!

Will the liquidity and share buyback party end one day? You bet it will but that is a topic for another day where I will introduce you to a very sharp emerging manager and his team working on an amazing and truly unique tail risk strategy.

As far as U.S. equities, I think the Caisse needs to stop indexing and start looking at ways to take opportunistic large bets using some of the information I discussed when I covered top funds' Q4 activity. This would be above and beyond the information they receive from their external fund managers.

By the way, if you compare the Caisse's top holdings to those of the Bill and Melinda Gates Foundation, you'll notice they are both long shares of Waste Management (WM), one of the top-performing stocks in the S&P 500 over the last year.

I'll share another interesting fact with you, something CNBC's Dominic Chu discussed a few days ago. Five stocks -- Apple (AAPL), Amazon (AMZN), Biogen Idec (BIIB), Gilead (GILD), and Netflix (NFLX) -- account for all of the gains in the Nasdaq this year. If that's not herd behavior, I don't know what is!!

Lastly, it takes a lot of time to write these in-depth comments and you won't read this stuff in traditional media outlets which get hung up on headline figures and hardly ever dig deeper. Please take the time to contribute to my blog on the top right-hand side, or better yet, stop discriminating against me and hire the best damn pension and investment analyst in the world who just happens to live in la belle province!

Below, Michael Sabia, CEO of the Caisse, discusses the Caisse's 2014 results with TVA's Pierre Bruneau (in French). Michael also appeared on RDI Économie last night where he was interviewed by Gérald Filion. You can view that interview here and you can read Filion's blog comment here (in French).

Also, some food for thought for the Caisse's real estate team. A new report from Zillow shows that rents across the U.S. are increasing, and not just in the expected regions of New York City, San Francisco and Boston. Overall, rents increased 3.3% year-over-year as of January. But many cities outpaced that, including Kansas City, which saw rent grow more than double the national average, jumping 8.5% year-over-year. St. Louis saw rent increase by 4.5% over the same period. Rents in Detroit grew by 5.0% and rents in Cleveland grew by 4.2%.

Zillow CEO Spencer Rascoff explains the U.S. rental market following the housing crisis: "All of a sudden, there were 5 million new renters and the rental stock didn't increase." People can't afford new homes so pensions should be focusing on multi-family commercial real estate and not just in prime markets. The Caisse is already betting big on multi-family real estate.