CDPQ released its results today, posting a 13.5% return in 2021, 8.9% over five years:
In 2021, CDPQ posted its best absolute and relative returns since2010 and produced over $10billion in value added
Depositors’ net assets totalled $420billion, with close to $49billion in investment results
Total assets in Québec posted highest ever growth, reaching $78billion, including $60billion in the private sector
Caisse de dépôt et placement du Québec (CDPQ) today presented its financial results for the year ended December31,2021. The weighted-average return on its depositors’ funds was 13.5% in2021, compared with 10.7% for the benchmark portfolio, representing $10.4billion
in value added. The annualized returns over five and ten years were
8.9% and 9.6%, respectively, also outperforming the benchmark portfolio.
As at December 31, 2021, CDPQ’s net assets were $419.8billion, up $149.1billion over five years, with investment results of $141.0billion and net deposits of $8.1billion. Over ten years, investment results were $241.0billion and net deposits were $19.8billion.
“In 2021, all our portfolios delivered strong performances, producing nearly $49billion
in investment results. Infrastructure and Private Equity generated
exceptional returns, Equity Markets leveraged the benefits of the
portfolio’s evolution, Real Estate’s repositioning yielded clear results
and we successfully navigated a pronounced rate hike in Fixed Income,” said Charles Emond, President and Chief Executive Officer of CDPQ. “This
shows that our strategies are working and effectively taking into
consideration today’s key challenges: the climate transition, the
digitization of the economy and ongoing changes on the international
stage.”
“The conditions we face—including pandemic-induced imbalances, rising
interest rates and growing inflation—significantly increase the
complexity of the business environment for2022.
Very disciplined execution of our strategy, rigorous investment
selection and sound diversification will be essential to continue
performing well in the coming years.”
“During the year, we intensified our presence in Québec with the strongest ever increase in our assets, now reaching $78billion.
All our teams played a key role in supporting the growth of our
Québec-based portfolio companies, here and abroad. Our market insights
have served their business plans, allowing them to achieve their
ambitions. I am proud of our teams, who work every day to build a
competitive and sustainable Québec economy while generating returns for
our depositors.”
Highlights of results and achievements
Each CDPQ depositor has its own investment horizon and
tolerance for risk. As such, their results vary based on their
investment policies. In2021, the returns of
CDPQ’s eight main depositors ranged from 9.3% to 15.9% for one year.
Their annualized returns ranged from 7.6%to 9.8% over five years and 8.2% to 10.6% over ten years. Over the long term, depositors require a 6% return on average.
Fixed Income: Good performance above the benchmark in a market under pressure from rising rates
In Fixed Income, CDPQ posted a -0.6% one-year return, outpacing its
benchmark index which stood at -1.2%, in difficult conditions related to
a pronounced rate hike. Private credit’s good results, combined with a
strategic positioning that anticipated the rate increase, allowed the
portfolio to outperform its benchmark. Over five years, the asset class
recorded an annualized return of 4.5%, above the 3.7% of its benchmark,
which represents value added of over $4billion. The excellent performance of all credit activities contributed to this result.
Private credit investments and commitments were numerous in2021, amounting to nearly $20billion.
Of note are investments in promising sectors such as telecommunications
and health care. CDPQ provided financing to Phoenix Tower
International, a leading global supplier of wireless communications
infrastructure, in a transaction that could total EUR775million. It also led new financing totalling USD300million
in Tillman Infrastructure, an American leader in telecommunication
towers. In Europe, CDPQ led a round of financing totalling EUR180million for a loan to Atrys Health, a leader in medical diagnostics, cancer treatments and occupational health.
Real Assets: Changes in Real Estate are delivering results, Infrastructure portfolio produces excellent performance
Real Estate
In 2021, the Real Estate portfolio generated a 12.4% return. This
performance stems from strategic changes that were implemented two years
ago, just before the pandemic. Investments in promising sectors such as
logistics, residential and life sciences were increased, and the
portfolio’s exposure to shopping centres and traditional office
buildings was decreased. The benchmark index’s one-year return was 6.1%.
Over five years, the portfolio obtained a 1.5% return, primarily due to
the major impact in2020 of the pandemic and
global confinement measures on shopping centres and office buildings,
sectors to which CDPQ’s real estate subsidiary was more exposed. Its
benchmark posted 5.1% for the period.
Over the last year, Ivanhoé Cambridge completed over 100transactions aligned with the strategic priorities of its diversification plan. Totalling $18.8billion, these transactions include $11.9billion in investments and $6.9billion in disposals. CDPQ’s real estate subsidiary expanded its exposure to logistics, notably by investing $600million in the PURE (PIRET) platform in Québec and Ontario, as well as nearly $300million
in Moorebank Logistics Park, Australia’s largest intermodal logistics
complex. In Northern Europe, Ivanhoé Cambridge launched a logistics
partnership with URBZ Capital that aims to deploy up to EUR400million
and was materialized with the acquisition of eight assets in the
Netherlands. In the rapidly growing life-sciences industry, the
subsidiary’s activities include an investment in a portfolio of nearly
one million square feet of offices and R&D laboratories in Genome
Valley (Hyderabad), the largest biotechnology hub inIndia.
Infrastructure
For one year, the Infrastructure portfolio posted a 14.5% return, its
best in ten years, compared with 11.4% for its benchmark index. This
result stems from the strong performance of portfolio assets in the
renewable energy and telecommunications sectors. Over five years, the
infrastructure activities produced an annualized return of 9.6%, above
the benchmark at 9.2%, a value add that is also attributable to the
portfolio’s exposure to the wind and solar energy sectors.
In 2021, the Infrastructure team continued its sustained and rigorous deployment of capital, with over $11billion
invested or committed. The telecommunications as well as goods and
passenger mobility sectors were central to its investment activities.
For example, CDPQ made major acquisitions in the telecommunication
towers sector in Brazil and Europe, including an investment of over EUR1.6billion in ATC Europe. In terms of transportation-related activities, it invested AUD2.3billion
in WestConnex, Australia’s largest road infrastructure project.
Alongside DWS, CDPQ also acquired Ermewa, the European leader in railcar
leasing. Lastly, through its partnership of over USD8billion with DP World, CDPQ entered the Indonesian market with the construction of a USD1.2-billion logistics and industrial port.
In 2021, the Equity Markets portfolio generated a 16.2% return, which
was in line with its benchmark’s 16.1% return. The portfolio adapted
its approach to include a better balance of styles, a broader investment
universe and more dynamic portfolio management to better navigate
different market environments. This greater flexibility allowed the
portfolio to further draw on the markets’ strong upward momentum
compared with previous years. Also driven by its exposure to developed
countries, the portfolio’s return was, however, limited by the modest
performance of the main Asian stock exchanges.
Over five years, the portfolio posted an annualized 10.7% return,
stemming in part from the good results of quality stocks and
growth-market stocks, while its exposure to Canadian markets limited
performance. The difference with the benchmark index’s 11.5% return is
notably attributable to the portfolio’s underweighting, over five years,
in the stocks of major high‑growth technology companies.
Private Equity
Net assets for the Private Equity portfolio now stand at over $80billion.
Its one-year performance was exceptional at 39.2%, well above the 32.1%
return of its benchmark.This is due to good positioning in the
technology, finance, health care and consumer sectors. The quality of
portfolio investments, combined with diligent post-investment asset
management, also explain its excellent five-year performance, with an
annualized return of 19.6%, also above its benchmark’s 14.3% return.
During the year, the Private Equity teams were disciplined in making $10billion in acquisitions and $13billion
in realizations. Highlights include an investment in Druva, a
California-based global leader in cloud data protection and management,
through leading a USD147-million financing
round, and a majority stake in Wizeline, a technology services supplier
operating in several countries. Also of note are two acquisitions
announced by Constellation, a property and casualty (P&C) and life
insurance platform with a USD1-billion
investment capacity, and the acquisition of a significant stake in Grupo
Diagnóstico Aries, one of Mexico’s fastest-growing medical diagnostic
services groups. At the end of the year, CDPQ invested in QIMA, a global
testing, inspection and certification (TIC) company whose technology
platform is well regarded in the supply chain compliance solutions
sector.
2021: Intensified presence in Québec, global leadership in Stewardship Investing
Québec: Strong commitment to generating performance for our depositors while contributing to economic development
In Québec, 2021 was a very active year in terms of
investments and initiatives, with assets in the private sector amounting
to $60billion. Accordingly, CDPQ’s total assets in Québec recorded their strongest ever growth, now totalling $78billion.
CDPQ continued to invest in and work with Québec
companies through the still fragile reopening of the economy. In this
context, CDPQ made over $6.5billion in new
investments and commitments, focused on its strategic priorities:
growth, globalization, the technological leap, and an economy and
communities that are sustainable.
Growth
Among these investments are those aiming to support the growth of
Québec companies, such as the increase in CDPQ’s stake in Énergir, which
now stands at 80.9%. Also of note: a stake in privatizing the New Look
Vision Group in a transaction valuing the company at $1billion and financing in a round totalling $100million
to support the rapid growth of VOSKER, a world leader in remote area
monitoring based in Victoriaville. In addition, CDPQ launched Ambition ME,
which provides financing and support to Québec mid-market companies
with strong potential to accelerate their growth and take them to the
next stage in their development.
Globalization
Leveraging its expertise in international markets and its vast
network, CDPQ continued supporting the globalization of Québec portfolio
companies; it made an additional investment of $475million
in CAE, a global aeronautics leader, becoming the company’s majority
shareholder, thereby allowing it to acquire U.S.-based L3Harris
Technologies. CDPQ also made another investment in Solmax, the world’s
leading geosynthetics manufacturer, allowing this Varennes-based company
to acquire TenCate Geosynthetics, a provider of geosynthetics and
industrial fabrics that offers its products in over 100countries. It also invested $60million
in Laval-based Savaria, a global leader in accessibility, for the
acquisition of Handicare Group, based in Sweden. Over the last five
years, CDPQ’s portfolio companies have been very active on the
international stage, making nearly 350acquisitions outside of Québec, which amounts to more than one perweek.
Technological leap
Supporting Québec companies that leverage digitization as a
performance driver is at the heart of CDPQ’s priorities. For example, in2021,
CDPQ took part in a $225-million round of financing in AlayaCare to
accelerate the digital transformation of home health care. In addition,
CDPQ invested USD 75million in an iNovia
Capital fund for growing technology companies. CDPQ also acquired a 20%
stake in Beyond Technologies, Canada’s leading SAP solutions integrator,
and invested in M3 Group, the country’s leader in mortgage brokerage,
to accelerate its digitization plan. Going beyond investing, CDPQ also
launched Repères numériques, an initiative for Québec SMEs looking to implement a digital business culture.
Sustainable economy and communities
During the year, CDPQ announced a commitment in MKB’s second specialized fund, which totals $175million
and will invest in late-venture and early growth-stage companies
focused on transportation decarbonization and electrification. It also
supported portfolio companies in their green shift, including Demers
Ambulances, which announced its first fully electric ambulance, and
Student Transportation of Canada, which placed a conditional order of
1,000electric buses from Québec-based Lion Electric, a leader in sustainable transportation.
REM and REM de l’Est
Work on the REM, CDPQ’s flagship project to provide sustainable
transportation in Québec, continued to progress quickly, notably on the
branch connecting Brossard to Central Station, which will be
commissioned in2022 despite the delays caused
by the ongoing pandemic’s impact on workers and the supply chain. The
network’s $7.8-million public art program was also announced. For the
REM de l’Est, which is in the planning stage, significant optimizations
have been announced on different sections of the route. CDPQ Infra will
soon present the enhanced project’s architectural and integration
proposal, and the committee of independent experts will also issue itsreport.
Climate strategy: A higher ambition to address the global challenge
In 2021, CDPQ renewed its climate ambition after exceeding the targets it set in its first climate strategy launched in2017.
Thanks to the experience acquired over the last few years, it
identified four areas of action, with short-, medium- and long-term
targets:
Hold $54billion in green assets by2025 to actively contribute to a more sustainable economy
Reduce by 60% the total portfolio’s carbon intensity by2030
Create a $10-billion transition envelope to decarbonize the main industrial carbon‑emitting sectors
Complete CDPQ’s exit from oil production by the end of2022
This distinctive approach, which demonstrates CDPQ’s global
leadership on climate matters, will lead to achieving a net-zero
portfolio by2050, while pragmatically meeting the major challenges the climate transition poses for all sectors of theeconomy.
More details on CDPQ’s stewardship investing strategy, including its
progress on climate targets and its commitments and initiatives in terms
of equality, diversity and inclusion, as well as governance, will be
presented in the Stewardship Investing Report published in thespring.
Financial reporting
CDPQ’s operating expenses, including external management fees, totalled $892million in2021. The expense ratio was 23cents per $100 of average net assets—the same level as in2020—which compares favourably to that of itsindustry.
CDPQ also has strong liquidity, which allows it to meet
future commitments and face market events. The credit rating agencies
reaffirmed CDPQ’s investment-grade ratings with a stable outlook, namely
AAA (DBRS), AAA (S&P), Aaa (Moody’s) and AAA (Fitch Ratings).
ABOUT CDPQ
At Caisse de dépôt et placement du Québec (CDPQ), we invest
constructively to generate sustainable returns over the long term. As a
global investment group managing funds for public retirement and
insurance plans, we work alongside our partners to build enterprises
that drive performance and progress. We are active in the major
financial markets, private equity, infrastructure, real estate and
private debt. As at December31,2021, CDPQ’s net assets totalled CAD 419.8billion. For more information, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages.
These were exceptional returns all around and CDPQ is the first big Canadian pension to report.
The key points are here:
In 2021, CDPQ posted its best absolute and relative returns since2010 and produced over $10billion in value added
Depositors’ net assets totalled $420billion, with close to $49billion in investment results
Total assets in Québec posted highest ever growth, reaching $78billion, including $60billion in the private sector
And when you drill down, all asset classes contributed to these results except for Fixed Income which was marginally down for the year but still beat its benchmark over the last year and past five years as private credit and portfolio positioning came through.
In 2021, the Real Estate portfolio generated a 12.4% return. This
performance stems from strategic changes that were implemented two years
ago, just before the pandemic. Investments in promising sectors such as
logistics, residential and life sciences were increased, and the
portfolio’s exposure to shopping centres and traditional office
buildings was decreased. The benchmark index’s one-year return was 6.1%.
Over five years, the portfolio obtained a 1.5% return, primarily due to
the major impact in2020 of the pandemic and
global confinement measures on shopping centres and office buildings,
sectors to which CDPQ’s real estate subsidiary was more exposed. Its
benchmark posted 5.1% for the period.
Over the last year, Ivanhoé Cambridge completed over 100transactions aligned with the strategic priorities of its diversification plan. Totalling $18.8billion, these transactions include $11.9billion in investments and $6.9billion in disposals. CDPQ’s real estate subsidiary expanded its exposure to logistics, notably by investing $600million in the PURE (PIRET) platform in Québec and Ontario, as well as nearly $300million
in Moorebank Logistics Park, Australia’s largest intermodal logistics
complex. In Northern Europe, Ivanhoé Cambridge launched a logistics
partnership with URBZ Capital that aims to deploy up to EUR400million
and was materialized with the acquisition of eight assets in the
Netherlands. In the rapidly growing life-sciences industry, the
subsidiary’s activities include an investment in a portfolio of nearly
one million square feet of offices and R&D laboratories in Genome
Valley (Hyderabad), the largest biotechnology hub inIndia.
I want to state that these are truly exceptional results for 2021 and publicly commend Ivanhoé Cambridge CEO, Nathalie Palladitcheff, and the entire team there for coming back so strongly.
Yes, the five year return still lags the benchmark but that is a huge portfolio which underwent massive repositioning and thus far, the strategy is paying off nicely.
I would recommend you read my discussion with Ms. Palladitcheff and Stéphane Villemain, Vice President, Corporate Social Responsibility to really gain a much deeper appreciation of the work they are doing there. You can read it here.
What else struck me? Obviously, Private equity had a stellar year:
Net assets for the Private Equity portfolio now stand at over $80billion.
Its one-year performance was exceptional at 39.2%, well above the 32.1%
return of its benchmark. This is due to good positioning in the
technology, finance, health care and consumer sectors.The quality of
portfolio investments, combined with diligent post-investment asset
management, also explain its excellent five-year performance, with an
annualized return of 19.6%, also above its benchmark’s 14.3% return.
During the year, the Private Equity teams were disciplined in making $10billion in acquisitions and $13billion
in realizations. Highlights include an investment in Druva, a
California-based global leader in cloud data protection and management,
through leading a USD147-million financing
round, and a majority stake in Wizeline, a technology services supplier
operating in several countries. Also of note are two acquisitions
announced by Constellation, a property and casualty (P&C) and life
insurance platform with a USD1-billion
investment capacity, and the acquisition of a significant stake in Grupo
Diagnóstico Aries, one of Mexico’s fastest-growing medical diagnostic
services groups. At the end of the year, CDPQ invested in QIMA, a global
testing, inspection and certification (TIC) company whose technology
platform is well regarded in the supply chain compliance solutions
sector.
Martin Laguerre, Executive Vice-President and Head of Private Equity and Capital Solutions, and his team are delivering outstanding results and this was truly a stellar year.
One note, you will see that CDPQ underweights high‑growth technology companies in Public Equities as it prefers to invest in them in Private Equity (more of a value tilt in public equities).
In my past discussion with CDPQ's CEO, Charles Emond, I remember him telling me this is deliberate and that they feel they have more control over these companies in their private equity portfolio.
Clearly, the good positioning in the
technology, finance, health care and consumer sectors really helped that portfolio deliver great results last year.
Next, Infrastructure led by Emmanuel Jaclot had a banner year:
For one year, the Infrastructure portfolio posted a 14.5% return, its
best in ten years, compared with 11.4% for its benchmark index. This
result stems from the strong performance of portfolio assets in the
renewable energy and telecommunications sectors. Over five years, the
infrastructure activities produced an annualized return of 9.6%, above
the benchmark at 9.2%, a value add that is also attributable to the
portfolio’s exposure to the wind and solar energy sectors.
In 2021, the Infrastructure team continued its sustained and rigorous deployment of capital, with over $11billion
invested or committed. The telecommunications as well as goods and
passenger mobility sectors were central to its investment activities.
For example, CDPQ made major acquisitions in the telecommunication
towers sector in Brazil and Europe, including an investment of over EUR1.6billion in ATC Europe. In terms of transportation-related activities, it invested AUD2.3billion
in WestConnex, Australia’s largest road infrastructure project.
Alongside DWS, CDPQ also acquired Ermewa, the European leader in railcar
leasing. Lastly, through its partnership of over USD8billion with DP World, CDPQ entered the Indonesian market with the construction of a USD1.2-billion logistics and industrial port.
I've covered many of these deals but clearly last year was exceptional for CDPQ's Infrastructure group and they really outdid themselves.
Lastly, CDPQ's Quebec portfolio led by Kim Thomassin grew significantly last year:
In Québec, 2021 was a very active year in terms of investments and
initiatives, with assets in the private sector amounting to $60billion. Accordingly, CDPQ’s total assets in Québec recorded their strongest ever growth, now totalling $78billion.
CDPQ continued to invest in and work with Québec companies through the
still fragile reopening of the economy. In this context, CDPQ made over
$6.5billion in new investments and
commitments, focused on its strategic priorities: growth, globalization,
the technological leap, and an economy and communities that are
sustainable.
I'm certain he will continue to lead the Sustainable Investing team with the leadership of Bertrand Millot in the right direction.
As for Kim Thomassin, her focus will now exclusively be on the Quebec portfolio:
I am certain under her leadership the Quebec portfolio will grow very nicely and they will discover the next generation of entrepreneurs our province desperately needs.
One last note on overall results.
When you see results like these across public and private markets, you understand why the weighted-average return on its depositors’ funds was 13.5% in2021, compared with 10.7% for the benchmark portfolio, representing $10.4billion
in value added. The annualized returns over five and ten years were
8.9% and 9.6%, respectively, also outperforming the benchmark portfolio.
This about as good as it gets, that's almost 300 basis points of value added over the benchmark portfolio for a $420 billion global pension fund.
By any measure, these are exceptional returns and I commend CDPQ's entire team for delivering such outstanding results.
I did email Charles Emond late today but I am pretty sure he's very busy with traditional media outlets.
Next week is March break for Quebec and I wish everyone at CDPQ un bon repos!
Below, an interview with CDPQ's CEO Charles Emond going over 2021 results and discussing geopolitical tensions (in French).
Charles talked about how they repositioned the $65 billion real estate portfolio to invest more in logistics and multifamily properties (from 28% to 40% of real estate portfolio).
I have to say, CDPQ picked the day to release its results but despite the geopolitical turmoil, it ended being a very decent day in markets.
In fact, the Nasdaq opened down 3.5% and ended the day up 3.3% as traders bet the Fed will likely not hike aggressively and when uncertainty reigns, they buy the dip on tech stocks:
Still, the downtrend in tech stocks remains intact and the situation in Ukraine can easily get far worse, clobbering risk assets.
I also embedded a clip going over CDPQ's climate strategy 2021. I am looking forward to reviewing the the Stewardship Investing Report that will be published in thespring.
Please note the annual report isn't out until April and will review that once it is publicly available.
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