A Conversation With PSP Investments' CEO on Their Fiscal 2025 Results
The Public Sector Pension Investment Board has been quietly assessing whether it has under-utilized a “home-ice advantage” and is looking for more ways to invest in Canada, chief executive Deb Orida said, a potentially timely pivot as the United States, a popular destination for pension investments, is looking riskier.
The internal look at portfolio design also comes as Ottawa is looking to “catalyze” billions of dollars in private investment to shore up the economy and reduce dependence on the U.S.
“We’re asking (ourselves) whether there’s opportunities to leverage our global capabilities in areas like infrastructure here at home,” Orida said as the investment manager for the pensions of federal government workers, the Canadian Forces and the Royal Canadian Mounted Police posted a 12.6 per cent return for the fiscal year that ended March 31, with assets climbing to nearly $300 billion.
She said the renewed focus at home stemmed from a wide consideration of factors influencing investing, including geopolitical realignment over the past couple of years, and was not done in direct response to either the Canadian government‘s desire for stepped-up domestic pension investments or the potential for tax and trade tensions with the U.S. to change the value proposition of investing there.
“It may have all come together at the same time. But really, for us, it’s about having the capabilities… better capabilities than we did, say, a decade ago, to make good investments in Canada, because we have this expertise and ability to add value,” she said.
International expertise that could be brought to assets in Canada, should they be made available, includes investing in airports and data centres, she said, adding that PSP has a subsidiary that specifically invests and operates airports around the world. Earlier this year, AviAlliance sold a stake in the Budapest airport and purchased three others in the United Kingdom: Aberdeen, Glasgow and Southampton.
As for data centres, PSP Investments and Macquarie Asset Management bought a control stake in AirTrunk in 2020 that was profitably sold in 2024 to a consortium of investors led Blackstone.
PSP has around $70 billion in investments in Canada, representing about 20 per cent of its portfolio, and that’s before including the purchase of a minority stake on Ontario’s 407 toll road, a deal that closed this month.
Orida said there is not a specific target for increasing domestic investments. Rather, the pension manager will include its new focus on what’s it’s calling the “Canada power intersection initiative” in making decisions that maximize returns without taking on undue risk.
PSP Investments is also focusing on its platform in Europe.
“We’re well positioned in Europe. We have a great team in London,” she said. “It’s a cross-asset class team where we have private equity, real estate, infrastructure, (and) private credit expertise.”
As for the United States, she said there has been no decision to pause or pull back on investments there as a result of trade and potential tax developments. But new risks are being taken into consideration, including the potential for new tax costs stemming from a controversial bill making its way through the U.S. Congress, when assessing investments there, she said.
“It’s not a black and white turning away. It’s rather an incorporation of the additional uncertainty, or risk, or potential implication of changes in tax laws, and then a holistic assessment of the risk adjusted return after factoring in all of that right relative to your other opportunities,” Orida said.
The potential changes to years of favourable tax treatment, which may be applied to Canadian investors in the U.S. if the Senate passes the legislation as the House of Representatives has done, are contained in section 899 of a large budget package U.S. President Donald Trump has dubbed “One Big Beautiful Bill.”
“We have analyzed the potential impacts of 899, and looked at different scenarios and analyzed the potential impacts on our existing portfolio,” she said. “As well, (we have) put thought to how we would incorporate that into new underwritings if there are new underwriting that are attractive, and how we would try to incorporate that uncertainty and potential impact.”
Earlier today, PSP Investments issued a press release stating it continues its track record of strong returns and portfolio resilience with a 12.6% return in fiscal 2025, net assets approach $300 billion:
Five and 10-year net annualized returns of 10.6% and 8.2%.
$31.9 billion in cumulative net investment gains above the Reference Portfolio over the last 10 years.
One-year net return of 12.6% and outperformance of the Reference Portfolio, demonstrating the resilience of our investment portfolio.
Montréal, Canada, June 13, 2025 - The Public Sector Pension Investment Board (PSP Investments) ended its fiscal year on March 31, 2025, with a 12.6% one-year net return, outperforming the one-year Reference Portfolio return by 1.5%. Led by strong performances from the Infrastructure, Private Equity, Public Market Equities, and Credit Investments portfolios, as well as from foreign currency exposure, these results continue PSP Investments’ track record of delivering strong long-term returns and added value through strategic asset allocation and active management decisions. PSP Investments also outperformed its five-year and 10-year benchmarks.
Net assets under management (AUM) grew to $299.7 billion, a 13.2% increase over the previous fiscal year, primarily driven by $33.5 billion of net income. Net transfers reached $1.3 billion, which included $3.2 billion received from the federal government for the funding of the plans and $1.9 billion that PSP Investments transferred back to the Consolidated Revenue Fund from a “non-permitted surplus,” as defined under the Public Service Superannuation Act, which limits the amount the Public Service Pension Fund can be overfunded.
“PSP Investments demonstrated significant organizational capabilities in delivering strong returns and showing resilience in uncertain times,” said Deborah K. Orida, President and CEO at PSP Investments. “We are proud of the excess return we generated over the one-year, five-year and 10-year periods. This demonstrates the strength and resiliency of our portfolio design and the benefits of investing with focus and foresight. We have the right strategy, talent and partners in place to continue to fulfill our important mandate.”
PSP Investments measures success at the total fund level through the following performance objectives:
- Achieve a return, net of expenses, greater than the return of the Reference Portfolio over a 10-year period: By the end of fiscal year 2025, PSP Investments achieved a 10-year net annualized return of 8.2%, which represents $31.9 billion in cumulative net investment gains above the Reference Portfolio and an outperformance of 1.3% per annum. This result was achieved without incurring more pension funding risk than the Reference Portfolio. The 1.3% outperformance represents the value added by PSP Investments from its strategic asset and currency allocation, active management decisions, and careful execution.
- Achieve a return, net of expenses, exceeding the Total Fund Benchmark return over 10-year and 5-year periods: By the end of fiscal year 2025, PSP Investments achieved a 10-year net annualized return of 8.2% against the Total Fund Benchmark return of 7.1%, and a five-year net annualized return of 10.6% against the Total Fund Benchmark return of 9.1%. This represents $18.8 billion in excess net investment gains over 10 years and $13.8 billion in excess net investment gains over five years.
Highlights of portfolio performance by asset class. All figures as at March 31, 2025.
The table below presents the annual, five-year and ten-year annualized performance of the asset classes set out in our Statement of Investment Policies, Standards and Procedures. For a detailed performance analysis of each asset class, please visit investpsp.com or download the annual report here.
Costs
As a long-term investor, we assess our costs in the context of the excess return, net of all costs, achieved over the Reference Portfolio. To this end, PSP Investments generated cumulative net investment gains, net of all costs, of $3.9 billion and $31.9 billion in excess of the Reference Portfolio over the one-year and 10-year period, respectively. To deliver this excess return, PSP Investments incurred operational costs of $790 million, investment costs of $1,609 million and financing costs of $1,465 million during the fiscal year 2025. These are in line with the costs incurred during the previous fiscal year despite a higher AUM and reflect our disciplined approach to cost management.About PSP Investments
The Public Sector Pension Investment Board (PSP Investments) is one of Canada’s largest pension investors with $299.7 billion of net assets under management as of March 31, 2025. It manages a diversified global portfolio composed of investments in capital markets, private equity, real estate, infrastructure, natural resources, and credit investments. Established in 1999, PSP Investments manages and invests amounts transferred to it by the Government of Canada for the pension plans of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York, London and Hong Kong. For more information, visit investpsp.com or follow us on LinkedIn.
Alright, it's Friday, I had an extremely busy morning and want to go over PSP Investments' fiscal 2025 results.
On Thursday, I had a Teams meeting with PSP's CEO Deborah Orida and will get to that below.
First, let me quickly go over some items from the 2025 Annual Report available here.
Below are the 2025 financial highlights:
More importantly, by the end of fiscal year 2025, PSP Investments achieved a 10-year net annualized return of 8.2%, which represents $31.9 billion in cumulative net investment gains above the Reference Portfolio and an outperformance of 1.3% per annum.
Also the press release mentions by the end of fiscal year 2025, PSP Investments achieved a 10-year net annualized return of 8.2% against the Total Fund Benchmark return of 7.1%, and a five-year net annualized return of 10.6% against the Total Fund Benchmark return of 9.1%. This represents $18.8 billion in excess net investment gains over 10 years and $13.8 billion in excess net investment gains over five years.
In terms of asset class and geographic exposures, PSP Investments invests half its total assets in private markets (Infrastructure, Real Estate, Private Equity, Natural Resources, Private Credit in Credit Investments) and half in public markets (stocks, bonds and liquid alternatives like hedge funds in Global Alpha portfolio).
Geographically, assets are invested globally with Canada (20%) and the US (40%) making up the bulk followed by Europe (16%):
Worth noting that PSP has a sizable allocation to Natural Resources, way ahead of its peers there, and this portfolio adds important diversification benefits and inflation protection.
Next, take the time to read Chair Maryse Bertrand's message:
On April 1, 2025, PSP Investments marked its 25th anniversary. Since inception, the organization has evolved into a sophisticated global investor, with net assets under management of $299.7 billion. As of March 31, 2025, we were third largest among Canada’s public pension investors.The Board has played an important role in this success, providing strong oversight and guidance to ensure the organization manages its growth and delivers on its long-term mandate.In fiscal 2025, our discussions focused on discharging our responsibilities for strategy, risk, and financial and human capital matters. Against a backdrop of geopolitical developments, and the transformation of the economy and evolving priorities in Canada and globally, we keenly followed and supervised how PSP Investments is adapting to the changing environment. At the enterprise level, we also engaged with senior management on the evolution of the organization’s culture and efforts to attract and develop the best talent.As PSP Investments has expanded globally, cost discipline and improving analytical capabilities through modern platforms and tools have long been focus areas for the Board. We wholeheartedly supported management in making operational excellence one of the three pillars of the corporate strategy and are closely tracking progress.
Also read CEO Deborah Orida's message:
As we have seen, market volatility and uncertainty have increased in the wake of US tariff announcements. Our well-diversified portfolio encompasses high-quality assets and multiple investment strategies aimed at maximizing long-term returns, managing risks, and building resilience. We have ample liquidity to maintain our focus on delivering returns over the long term, and we continue to proactively incorporate potential shifts in global dynamics and economic conditions into our portfolio design process, risk management and investment decisions.
And this:
In fiscal 2025, we launched our three-year corporate strategy, which focuses on excellence in the way we invest, operate, and live our mission. As part of our strategy, we are taking a more focused approach to our active investing activities, doubling down on our areas of expertise and conviction to drive greater risk-adjusted active returns. This strategy is enabled by the deep investing capabilities we have developed over the last 25 years.
For example, PSP Investments has been investing in infrastructure since 2006, and we have developed strengths in transportation, data infrastructure and energy, where we can leverage our platform approach to make value-added investments. The acquisition of three airports in Scotland and the wider United Kingdom (Aberdeen, Glasgow and Southampton) by our wholly owned subsidiary AviAlliance is a prime example of our strategy in action. Leveraging our global airports expertise, we acquired assets with significant value-creation potential and subsequently syndicated part of the investment to Blackstone.
We also announced our largest-ever Canadian transaction, a multibillion-dollar investment in 407 Express Toll Route (407 ETR), a toll highway spanning the Greater Toronto Area.
This stable, long-duration investment fits our infrastructure strategy and supports a critical road serving more than 3 million Canadians weekly.
In fiscal 2025, we also crystallized value for contributors and beneficiaries through some of our largest-ever dispositions. This included the sale of our stake in AirTrunk, a hyperscale data centre platform in the Asia Pacific region, which experienced phenomenal growth during the time of our ownership. The sale yielded exceptional returns beyond our investment base case, reflecting both the outstanding performance of the company and the high valuations within the sub-sector.
In addition, I want to commend the team at our subsidiary, Canada Growth Fund Investment Management (CGFIM1), who have closed 12 transactions across five provinces since CGFIM’s launch in the summer of 2023. As of March 2025, they had committed $2.4 billion to projects aimed at accelerating the growth of Canada’s clean economy. You can learn more about the Canada Growth Fund through its annual report.
Below is PSP's executive team:
Discussion With PSP's CEO Deborah Orida
Alright, let me get to my discussion with Deborah (Deb) Orida or else this comment will be endless and it's the weekend and most people never read my Friday comments (they'll read this one).
I want to thank Deb for taking the time to talk to me and also thank Maria Constantinescu for setting up the Teams meeting and sending me the press release ahead of time (I did not have access to the full report until today when it was made public).
I began by asking Deb to give me an overview of the results and she did:
As you said, we've had a great year, 12.6% is very good. But what I most proud of is continuing the track record of performance over the longer term which I know you're focused on as well. On both the 5 and 10-year basis, we outperformed the Reference Portfolio and the Benchmark and in total since inception we have now delivered cumulative net income of $205 billion.
It's been really great and I can't take credit for all of it. A lot of it is leveraging the deep expertise PSP has in areas like Infrastructure which delivered 17.8% last year, Credit Investments which delivered over 15% last year and I think we are well positioned for the future.
I said these were extremely strong results with value added coming from all asset classes including Fixed Income which gained a little over 10% last year (shockingly unless their Global Alpha, ie. external hedge fund portfolio is managed via Fixed Income portfolio and that's not clear to me).
I shifted my focus to private markets noting Private Equity had another solid year and PSP's approach has always been solid fund investments and co-investments with a few key strategic partners.
I told Deb the almost 17% return in PE kind of shocked me because if you look at large peers, they're struggling a bit in this asset class as there are a lot of headwinds (higher for longer, historically low distributions, etc). Again, I didn't have access to the annual report to read the details but Deb shared this with me:
In Private Equity, we've had the benefit of taking a combined funds and direct approach. When Simon (Marc) came in, he brought the two groups together, so there wasn't that competition for growth between funds and directs that you might have in other funds. It's one team taking a combined approach.
This has allowed us to focus on good partners, extract good co-investment opportunities out of that focus on those relationships. We've also been patient around the allocation. As you know, when we and others had the denominator effect that PE looked over-allocated, but as you also know at PSP, we have the long-term policy allocation target allocation as well as the medium-term approach which allows us to be patient as we think about how those allocations love along relative to the long-term target.
In this last year, we did do a secondary but it was executed at a pretty good price as opposed to a price we might have faced if we forced ourselves to sell down when everyone else was also experiencing the impacts of the denominator effect.
[**Note this from annual report:" Private Equity generated over $9.4 billion in cash distributions in fiscal 2025, driven by direct exits, refinancings and secondary sales, despite global merger and acquisitions slowdown. These asset monetization initiatives significantly contributed to the advancement of the portfolio recalibration, bringing allocation down by 1.7% this year, to 13.6%.]
I noted the Yale endowment recently sold $3 billion in private equity fund stakes and reportedly took a haircut of 10% (interestingly, they're trying to get ahead of the tsunami of selling in secondaries market).
I shifted my attention to Credit Investments which continue to deliver strong returns, gaining 15.4% last fiscal year. Credit Investments on non-investment grade credit investments in North America and Europe across private and public markets, as well as rescue financing opportunities.
Deb shared this with me:
We're almost 10 years, establishing the business in 2015. It's a well-established team. In that almost 10-year period we delivered inception-to-date 12%, most of that was in a lower rate environment, so it's a team with a deep track record. This year's returns at over 15% are very strong.
But I think most importantly, as you're seeing a bunch of new entrants in that market, our long-term track record --you're right we have a team in London but we also have folks in New York and Montreal -- so it's a well established team and it's a team that's well positioned to take advantage of the broader relationships that we have at PSP as a multi asset class investor.
So where new private credit funds might be anxious to deploy, we are being more patient and we can also leverage the relationships that we have with the sponsors across private equity, infrastructure and real estate to make sure we are getting the good calls.
She's absolutely right about that, the Credit Investments team at PSP is very experienced and along with that at CPP Investments, I'd say they're the two best teams in the global institutional world and are very smart and careful in how they deploy capital and leverage off their strategic relationships across all asset classes.
[**Note: Private Credit was initiated at PSP under the watch of Andre Bourbonnais, he deserves the credit for that asset class.]
I then shifted my attention to Real Estate where it didn't surprise me returns were flat last year and asked her to discuss the structure of that portfolio.
Deb responded:
On Real Estate, you're right, flattish performance. This year, we continue to see some pain in some of the specialty areas of offices like life sciences and studios, offset by strong performance in areas like logistics.
Overall, over the last couple of years, we've done some good work on focusing the strategy on sectors and geographies where we have expertise and a track record of success and conviction around the future.
We've also been refining our partner portfolio and I would say the team has been rolling up their sleeves, tackling and preserving and in some cases creating value in some of the more challenging investments we have in the portfolio.
We don't see it in the returns yet but I think we are doing the right things.
I asked her if that portfolio remains an important one at PSP as it was 15% at one point and she replied:
We are sub 10% now (8.9%) and Real Estate remains part of a broadly diversified portfolio. As you know, PSP is 50% public markets and 50% private alternatives and I think Private Equity, Infrastructure, Private Credit, Real Estate and Natural Resources remain the right contributors to the diversification of the portfolio.
I agree, shifted my attention to Infrastructure which had a stellar year returning almost 18% last year (17.8% to be exact). I talked about how PSP and KKR teamed up to buy AEP Transmission stake for $2.8 billion earlier this year (see my comment here) but asked Deb why this portfolio surged last year.
She replied:
Well, you know this Leo, PSP has been investing in some of the areas that have become hot more recently for years. We've been investing in data centres for years and the opportunity we had to sell AirTrunk for example which was the world's largest data centre transaction when Blackstone and CPPIB bought it from us was an opportunity to realize the value that had created by backing what was originally a smaller platform to grow and then take advantage of the enthusiasm n the market for that type of asset. So it's really about having the opportunity to realize some of the value creation from the capabilities we've been investing in for years.
The other capability that has created and will create value for us in the future is AviAlliance, our airports platform where we sold Budapest this year, we bought AGS Airports that owns and operates Aberdeen, Glasgow and Southampton airports. When we bought AGS, it was the fact that we had operating expertise in that airports platform that allowed us to buy assets that had value creation opportunities. And after we did that deal, Blackstone was interested in co-investing with us, not the other way around. 22% went to Blackstone.
No doubt about it, PSP Investments has one of the best airports platforms among institutional investors and AviAlliance is doing a great job:
I also mentioned PSP Investments recently bought a stake in Highway 407, a great Canadian asset and Deb responded:
Great point, you know we're really proud of our investments in Canada. At the end of the fiscal year, we had almost $70 billion invested in Canada and that was of course before the 407 because it closed in June. 407 was or largest single investment in Canada to date and also an opportunity to leverage our deep infrastructure expertise in tool roads in particular.
At that point we covered the main asset classes and my apologies to the Natural Resources team which delivered a solid 8.6% gain last year as I didn't delve deeply into their activities but read about them in the annual report:
I asked Deb what is going on with the non-permitted surplus and how it's affecting PSP.
She responded:
As you know, at our stage of maturity, the biggest source of the growth of the Fund is actually from the income of the Fund. When you think of the fact that our net contributions from Ottawa were $1.3 billion and obviously the portfolio grew by tens of billions. So the puts and takes from Ottawa are not the main source of our growth.
That said, we were very happy how we worked with our sponsor to operationalize the transfer of the money from the non-permitted surplus back to Ottawa. They were very thoughtful about doing it in a way that would not impact the returns or force us to sell something when it wasn't the right time.
I think the fact that there is a non-permitted surplus is in some ways a testament to the capabilities at PSP and the returns we were able to generate even within our risk budget. We will continue to owrk with our sponsor and manage that as we need to.
Finally, I noted Patrick Charbonneau was appointed the new CIO earlier his year and it feels like a long and crazy year with the tariff saga and we are not done yet as the second half of the (calendar) year is only unfolding now.
I asked Deb how PSP is adapting to the insane volatility in markets and rising geopolitical risks.
She replied:
I would say two things. One is as we face volatility and the risk of future volatility, I'm really happy not only we have Pat in the CIO seat but we also have Alexandre Roy in the CRO seat. Alexandre started in Risk but then became the number two in our CIO Office before he became the Chief Risk Officer and in the volatility we faced in April after Liberation Day, I could not have been happier -- because I think Alex has been at PSP 18 or 19 years -- so I could not have been happier we had someone as smart, committed and knowledgeable about PSP in the CRO seat as Alex.
So Alex will help us manage the short-term and we are well positioned from a liquidity standpoint so we can stay focused on the long term through volatility like that.
And as it relates to the long term, I think the big opportunity for Pat in the CIO seat is we have good portfolio design capabilities, so we don't need to change that, that's not why Pat has become the CIO.
But rather the expertise that Pat has -- deep expertise in private markets, infrastructure and CEO of Canada Growth Fund -- I think is going to allow to bridge the gap between portfolio design and portfolio execution.
He will help us with investors, particularly private market investors, being able to understand better what the Total Fund wants from their investments.
You know when I sat in an asset class, I used to just wait from the CIO Office to know how many billions of dollars I got to spend. But I think the next evolution of that is investors actually understand from a portfolio design perspective, given that we back pension liabilities that are linked to inflation, what the Fund wants from me in infrastructure is not only stability but also inflation protection and therefore I know what kind of assets I should be looking for in order to preserve the mandate.
Great point, that's why Deb is the CEO, she understands things at a higher level and has placed key people to focus on execution and preserving that mandate.
As I noted, portfolio design is there, now it's all about execution and thinking about the Total Portfolio and making sure the liabilities are met especially that inflation protection component.
We touched on the activities on the Canada Growth Fund and she told me she's happy Yannick Beaudoin took over the helm from Pat and they continue to execute that mandate very well, up to 13 transactions and $2.7 billion committed across carbon capture, cleantech and critical minerals. "And most of the money has been committed in western Canada."
I asked her one last quick question on Michael Sabia and Marc-Andre Blanchard going to Ottawa to serve Prime Minister Carney and she said she has "great respect" for both of them and "we as Canadians are very lucky to have their service to the country."
I completely agree and wrapped it up there.
Once again, I thank Deb for another illuminating discussion and I feel PSP is very lucky to have her at the helm of this organization (hope to meet her in person one day as I feel I know her well now).
Below, Tom McClellan, The McClellan Market Report editor, joins 'The Exchange' to discuss how the markets are digesting Israel's airstrikes against Iran.
Next, Stephanie Link, chief investment strategist at Hightower Advisors, says current market dips are buying opportunities. She favors growth stocks like Snowflake and turnaround plays like Gap, but avoids bonds for now.
Third, Bob Elliott, Unlimited CEO, and Krishna Guha, Evercore ISI global policy head, join 'Closing Bell Overtime' to talk the day's market action.
Lastly, DoubleLine Group CEO Jeffrey Gundlach talks about the price of gold, fixed income, private credit, President Donald Trump's tax bill, Federal Reserve monetary policy and artificial intelligence with Lisa Abramowicz at the Bloomberg Global Credit Forum in Los Angeles.
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