CDPQ CEO Charles Emond Reaffirms $100B Target in Quebec Assets by 2026
The Caisse de dépôt et placement du Québec wants to continue to increase its impact on the Quebec economy. The institution is staying focused on its target of holding $100 billion in assets in Quebec by 2026, its CEO, Charles Emond, said on Wednesday. The Caisse also wants to continue to focus on “the immense potential” of artificial intelligence to increase its returns.
“We already have a strong presence here. We are invested in 550 companies in Quebec. And our ambition is to have even more impact,” underlined Charles Emond, president and CEO of the Caisse de dépôt, during a conference organized by the Chamber of Commerce of Metropolitan Montreal.
In 2014, the value of the Caisse's Quebec assets was approximately 60 billion Canadian dollars. It amounted to 68 billion in 2020, then to 88 billion last year. The objective? 100 billion by 2026.
“Our presence is equivalent to 16% of Quebec’s entire gross domestic product. What that means for you is that your Fund is the most invested pension fund in the world in its local economy,” argued Mr. Emond.
Concerning the deployment of the Caisse's investments in Quebec over the next two years to reach the objective of 100 billion: “The files we like are when a Quebec company goes to buy a company outside. These are files that we put on our fast track,” said Mr. Emond.
The Fund is also banking on “major projects”, “major infrastructure projects”, added its manager. In this regard, the institution must also submit its report to the government for the establishment of a structuring transport network in the Quebec City region in the coming weeks.
Better analytics thanks to artificial intelligence
On another note, the head of the Fund also underlined “the immense potential” of artificial intelligence (AI) as a performance lever for his institution. “We are developing our own capabilities to enrich our decision-making and make our processes more efficient,” he said.
Thanks to these new technologies, “we will be able to triple, or even quadruple, the production of memos and notes summarizing the quarterly calls of portfolio companies,” Mr. Emond gave as an example.
“We also analyze a number of data that would be impossible to analyze humanly so quickly. To give you an order of magnitude, there are 75,000 data points that are now analyzed every day to predict the monthly return on thousands of securities,” he added.
Another example of the use of AI: the “predictive value of language”. During conferences or calls with financial analysts, the comments of management teams are scrutinized by analysis tools. These can then reflect future trends.
“The language you use has predictive value for us,” said Mr. Emond, addressing the audience of business people who came to listen to him.
The implementation of these new technologies is already starting to bear fruit. “In two years, we started from an incubator and today, out of our stock market portfolio of 115 billion, we have 20 billion which are managed by our managers, who use a systematic approach based on artificial intelligence. […] This 20 billion mandate has a performance that is in the first quartile of global equity managers,” argued Mr. Emond.
CDPQ's CEO Charles Emond spoke in front of the the Chamber of Commerce of Metropolitan Montreal and his message was clear, the organization is already highly present in Quebec and is committed to attaining its target of $100 billion in Quebec assets by 2026.
In order to attain this target, CDPQ will be investing across public and private markets.
Charles explicitly stated they will help Quebec companies grow through acquisition and they are looking at several potential infrastructure projects, including a transport project in Quebec City.
CDPQ's investment in Northvolt is also a very important one in the battery space.
I also wouldn't be surprised if CDPQ will be an investor in Hydro Quebec's new C$185 billion ($137 billion) “Action Plan” to build new power generation capacity and improve transmission reliability by 2035.
Why not? If it makes sense and if mutually beneficial to both organizations, it's a win-win-win for everyone and Michael Sabia and Charles Emond know each other extremely well.
And if my fear of a major global recession in 2025-2026 does pan out,
well all the more reason for CDPQ to invest in electricity transmission
at home.
Last week I discussed the pros and cons of CDPQ's dual mandate and said it will be tested during the next financial crisis.
This isn't necessarily a bad thing, after all, the true resiliency of that Quebec portfolio will be tested and I suspect it will continue to do well over the long run.
There are great public and private companies in that portfolio.
In fact, take the time to read CDPQ's 2023 Annual Report starting at page 49 to see the Quebec portfolio in action across all asset classes:
If you zoom in on table 18, you'll see a few well-known companies:
Like I said on Tuesday when I went over OMERS CEO Blake Hutcheson tackling the one question head on, there are great Canadian companies but the market here is small relative to the US.
Still, if investing in Canada, pay attention to where CDPQ, CPP Investments, OMERS, OTPP and other Maple Eight funds are investing.
They have "home court advantage" as Blake said.
Lastly, as far as AI helping CDPQ's productivity and decision-making process, I have no doubt and it's true their systematic global equities portfolio is doing very well (not sure however if outperformance is AI related or just that momentum strategies are outperforming thus far; see my interview with Vincent Deslisle, head of Liquid Markets, last year when I covered CDPQ's mid-year results).
AI serves a purpose, to be sure, but I'm a little more measured in terms of what I expect it to do in terms of helping funds achieve better returns (long conversation, I basically agree with Ken Griffin, machines will not replace humans).
Alright, let me wrap it up there and remind everyone again that CDPQ's 2023 Annual Report is now available here.
Also note Charles Emond's speech and discussion at the Chamber of Commerce of Metropolitan Montreal is not yet available but it will be here.
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