Caisse de dépôt et placement du Québec posted a negative return of 5.6 per cent in 2022, in what the Quebec pension giant called “the worst market in 50 years.”

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Pension giant Caisse lost $24.6 billion last year investing in 'worst market in 50 years' Back to video

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The fund had a tough first six months last year, as stock and bond markets stumbled on spiking inflation, historic interest rate hikes by central banks and rising geopolitical tensions, chief executive Charles Emond said during a Feb. 23 news conference to discuss CDPQ’s results.

“In this unusual context, and with few places for investors to hide, all of our asset classes outpaced their respective indexes,” Emond said, describing the period as “the worst concurrent correction in the stock and bond markets in 50 years.” The sharp volatility — which the Caisse is still witnessing — could persist for some time, he added.

The past two years, 2021 and 2022, were opposites and showed how the portfolio has behaved during extremes, Emond said. He said 2021 was a “bullish market” driven by growth in technology and the portfolio did better than the benchmark, generating its second best value added in its history. In a “bearish” 2022, by contrast, the market was hit by inflation and rate hikes, while oil and tobacco outperformed and the portfolio produced its third best value added in history, Emond added.

“What that means is that our portfolio is able to beat a comparable portfolio in bearish and bullish markets,” he said.

As of Dec. 31, 2022, the Caisse had net assets of almost $402 billion, up from $392 billion at mid-year but down $18 billion from $420 billion in the beginning of the year. This decrease in net assets was largely due to falling values in fixed income, which saw a sharp downturn due to the fastest monetary tightening seen in decades, CDPQ said.

The fixed-income segment recorded a loss of $20.1 billion for a negative 14.9 per cent one-year return in 2022.

The equities class, which includes the equity markets and private equity portfolios, also generated a negative return, with a loss of 5.7 per cent or $12.1 billion over the year. It said this was because the flagship indices of major stock markets experienced a severe correction and showed unusual volatility in 2022.

Meanwhile, it said real estate and infrastructure performed very well against rising inflation, with the one-year return of real assets at 12 per cent, above the 5.2 per cent of benchmark index. This equated to $10.5 billion in gains in real asset investment results for 2022.

Overall, CDPQ lost $24.6 billion through its investment activities in 2022.

The Caisse said the weighted-average return on its depositors’ funds in 2022 nevertheless outperformed the negative 8.3 per cent return for the benchmark portfolio, equivalent to a $10-billion gain.

Last year, CDPQ made its first investment in Japan with Shizen Energy Inc., while it acquired European locomotive leasing provider Akiem Group SAS and the power transmission network of Terna S.p.A in Latin America. It also invested US$2.5 billion in port infrastructure in the United Arab Emirates.

The Caisse also said it made $4 billion in new investments and commitments in Québec last year, with its total assets in the province slightly up to $78.4 billion, despite growing economic uncertainty that dampened the volume of transactions worldwide. It had announced its goal of reaching $100 billion in assets by 2026.

“Globally, we’re the most active pension fund manager in our local economy, and our presence significantly increased during the turbulent period of the last few years. Every day, our teams are at work to support Québec companies,” Emond said.

• Email: dpaglinawan@postmedia.com | Twitter: denisepglnwn