Caisse de dépôt et placement du Québec

Caisse de dépôt et placement du Québec
Crown corporation
Industry Institutional investor
Founded July 15, 1965
Headquarters 65, rue Sainte-Anne
Quebec City, Quebec, Canada (Main business office located in Montréal)
Key people
 Michael Sabia, CEO
Total assets Increase $286.5 billion CAD (June 30, 2017)
Number of employees
 851 (at December 31, 2015)
Website www.cdpq.com

Caisse de dépôt et placement du Québec (CDPQ) (lit. Quebec Deposit and Investment Fund, also referred to in English-language media as the Caisse) is an institutional investor that manages several public and parapublic pension plans and insurance programs in Quebec. It was founded in 1965 by an act of the National Assembly under the government of Jean Lesage. It is the second largest pension fund in Canada, after the Canada Pension Plan (CPP).[1] As at June 30, 2017, CDPQ managed net assets of C$286.5 billion invested in Canada and elsewhere.[2] CDPQ is headquartered in Quebec City in the Price building and has its main business office in Montreal at Édifice Jacques-Parizeau.

History

Foundation and growth

The Caisse de dépôt et placement du Québec was established on July 15, 1965 by an Act of Québec’s National Assembly to manage the funds of the Quebec Pension Plan, a public pension plan also created by the Québec government. In the years following, CDPQ was entrusted with managing the funds of other public pension and insurance plans: the Supplemental Pension Plan for Employees of the Québec Construction Industry (1970), the Government and Public Employees Retirement Plan (RREGOP) (1973), the Pension Plan of Management Personnel (PPMP) (1973) and the Fonds de la santé et de la sécurité du travail (1973).

CDPQ initially focused on bonds before entering the Canadian stock market in 1967. It then created its private equity portfolio (1971), investing in Québec companies. Since 1974, it has been managing the largest Canadian equity portfolio in the country.

Between 1975 and 1984, CDPQ adopted new investment guidelines, placing greater emphasis on equity and entering the real estate market. It acquired its first office building and its first shares listed on foreign exchanges (1983). In 1984, it made its first foreign private equity investment. In 1978, another government body, the Fonds d’assurance automobile du Québec, entrusted the Caisse with the management of its funds.

In 1989, CDPQ acquired Ivanhoe Inc., the real estate arm Steinberg’s grocery store chain, consisting mainly of shopping centres, and diversified its real estate portfolio with investments abroad. In 1994, the Caisse began to manage the funds of another government institution, namely, the Retirement Plans Sinking Fund. Total assets under management reached $28 billion CAD in 1986.

In 1996, the Caisse’s Real Estate group was the leading real estate owner in Québec and the second largest in Canada. The following year, legislative changes allowed the Caisse to invest 70% of its portfolio in shares, compared to a maximum of 40% prior to that. Since 2003, the Caisse has received the best short- and long-term credit ratings issued by the major credit rating agencies: Moody's Investors Service (Moody’s), Standard and Poor's (S&P), and Dominion Bond Rating Service (DBRS).

In 2005 and 2006, the Caisse made its first major infrastructure acquisitions by investing in foreign airports. The next year, with partners, it purchased the Legacy Hotels Real Estate Investment Trust (REIT), owner of the prestigious Château Frontenac in Québec City. In 2007, its results put the Caisse in the first quartile of large Canadian pension funds for the fourth consecutive year.

In the wake of the 2008 financial crisis, during which CDPQ lost almost $40 billion CAD in asset-backed commercial paper investments, the Caisse implemented a series of measures to maximize efficiency, focus on core competencies, and strengthen risk management to support its long-term performance.

As of 2017, CDPQ has 41 depositors and is active on Canadian and international markets. The Caisse holds a diversified portfolio including fixed-income securities, publicly listed shares, real estate investments, and private equity. A shareholder in more than 4,000 companies in Québec, elsewhere in Canada, and around the world, the Caisse is internationally recognized as a leading institutional investor.[3]

2008 loss of $40 billion

In 2008, CDPQ lost $39.8 billion and generated a minus-26-per-cent return, making it the worst in the Caisse's 43-year history (in 2002, the Caisse had suffered a minus-9.4-per-cent return, its second worst year). The 2008 annual report of the Caisse shows that no bonuses were paid for 2008.[4] The Caisse subsequently undertook a major restructuring. CEO Henri-Paul Rousseau took the lead and negotiated the conversion of the ABCP into long-term bonds, and major players agreed to prevent a forced liquidation that would have resulted in losses of $20 billion CAD.[5] The resulting Montréal Agreement was deemed success and the 2008 loss was almost completely recouped in subsequent years.[6][7]

Creation of CDPQ Infra

In June 2015, the Québec National Assembly passed Bill 38 "An Act to allow the Caisse de dépôt et placement du Québec to carry out infrastructure projects". CDPQ thereafter created a new subsidiary dedicated to the development of infrastructure projects, CDPQ Infra. The Quebec government submitted two projects for CDPQ Infra's evaluation: a public transit system to be integrated to the future Champlain bridge, and a public transit system linking downtown Montreal, the Montréal–Pierre Elliott Trudeau International Airport and the West Island.

On April 22nd, 2016, CDPQ Infra unveiled plans for a new public transportation project, the Réseau électrique métropolitain (REM).[8] As proposed, the REM will link downtown Montréal, the South Shore, the West Island (Sainte-Anne-de-Bellevue), the North Shore (Deux-Montagnes) and the airport in a unified, electrically powered and fully automated, 67-km light rail transit (LRT) system.[9] The new network represents an investment of approximately $5.5 billion, of which CDPQ Infra is willing to commit $3 billion as the majority shareholder.

On March 8, 2017, General Electric said it had agreed to sell GE Water for around USD $3.4 billion to Suez SA in France and Caisse de dépôt et placement du Québec.[10]

Presidents

Mandate and independence

In 2005, article 4 of CDPQ's founding statute[11] was amended to make the institution's mandate explicit:

4.1. The mission of the Fund is to receive moneys on deposit as provided by law and manage them with a view to achieving optimal return on capital within the framework of depositors' investment policies while at the same time contributing to Québec's economic development.

In June 2015, the CDPQ statute was further amended to specify that CDPQ "acts with full independence in accordance with this Act." [12]

Organization

CDPQ's Board of Directors can have up to 15 members, two-thirds of whom must be independent. It is composed of its Chair, the President and CEO, depositor representatives, and independent members. The Board is responsible for establishing CDPQ's main orientations and ensuring that the Caisse operates according to all legislative and regulatory requirements. The position of Chairman of the Board of Directors is separate from that of President and Chief Executive Officer.

The Québec government appoints members of the Board of Directors, upon consultation with the Board. CDPQ’s Board of Directors has defined a profile of expertise and experience required for its independent directors.[13]

The Executive Committee is composed of the President and CEO and the senior officers of CDPQ’s various sectors.

Subsidiaries

CDPQ has three subsidiaries: Ivanhoé Cambridge, Otéra Capital and CDPQ Infra.

CDPQ Infra works on creating major public infrastructure projects. One of the biggest projects for CDPQ Infra is the Réseau électrique métropolitain (REM) in the Greater Montreal area.

Ivanhoé Cambridge is the real estate subsidiary of the Caisse. The Company aims to invest in real estate assets ranging from office space, shopping centers to multiresidential buildings. Some of the biggest projects for Ivanhoé Cambridge are CIBC Square in Toronto and DUO in Paris.

Otéra Capital is a balance sheet lender in commercial real estate debt in Canada.

The headquarters for each of these subsidiaries are located in Montreal, in the Jacques-Parizeau Building.

Investments

Type

CDPQ's portfolio is divided into four main categories of assets:[14]

Geographic diversification

Geographic exposure of the overall portfolio, based on the country where the main place of business of the company or issuer is located or, in the case of real estate, the geographic location of properties:[15]

Region 2015 2014
Canada 46,0% 52,6%
United-States 26,5% 21,8%
Europe 13,8% 14,1%
Emerging markets 7,7% 6,7%
Other regions 6,0% 4,8%
Total 100% 100%

Main depositors

See also

References

  1. ↑ http://www.swfinstitute.org/canadian-public-pension-fund-rankings/
  2. ↑ http://cdpq.com/en/news-media/press-releases/four-year-annualized-return-reaches-109-91-return-2015
  3. ↑ http://cdpq.com/en/about-us/history
  4. ↑ http://cdpq.com/sites/all/files/medias/en/nouvelles-medias/documents/ra2008_rapport_annuel_en.pdf
  5. ↑ http://www.theglobeandmail.com/report-on-business/abcp-anatomy-of-a-panic/article4296101/?page=all
  6. ↑ http://www.ledevoir.com/economie/actualites-economiques/401897/des-papiers-commerciaux-payants
  7. ↑ http://www.lactualite.com/blogues/le-blogue-economie/cinq-ans-apres-le-point-sur-lannus-horribilis-de-la-caisse-de-depot/
  8. ↑ http://montrealgazette.com/news/local-news/public-transit-update-for-montreals-west-island-south-shore
  9. ↑ https://www.youtube.com/watch?v=2-H5hq-1yS0
  10. ↑ Hufford, Austen (March 8, 2017). "General Electric to Sell Water Unit to France’s Suez, Canadian Pension Fund". Wall Street Journal. New York City. Retrieved March 9, 2017.
  11. ↑ http://www2.publicationsduquebec.gouv.qc.ca/dynamicSearch/telecharge.php?type=2&file=/C_2/C2_A.html
  12. ↑ http://www2.publicationsduquebec.gouv.qc.ca/dynamicSearch/telecharge.php?type=5&file=2015C17A.PDF
  13. ↑ http://www.cdpq.com/sites/all/files/medias/fr/lacaisse/gouvernance/documents/profil_expertise_et_experience.pdf
  14. ↑ http://www.cdpq.com/en/investments/portfolio
  15. ↑ Portfolio - Table 11,.
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