Caisse de dépôt et placement du Québec is planning to double its infrastructure portfolio over the next four to five years, head of infrastructure Emmanuel Jaclot, told Infrastructure Investor.
The Canadian pension wants to increase its current C$27.8 billion ($21 billion; €17.7 billion) portfolio to about C$60 billion over that timeframe. CDPQ has a total portfolio worth about C$330 billion.
“We still have plenty of deals to do,” Jaclot said. “It’s about finding long-term yield and value and having a diversified portfolio. Diversifying the risk is as important as getting top dollars.”
Jaclot’s pledge comes after CDPQ revealed in August a -1 percent return for its infrastructure portfolio in the first half of 2020, while its real estate portfolio reported a -11.7 percent return. Infrastructure, which has produced an annualised 8.2 percent return over the past five years, “delivered the expected performance in a context where it could have been harder hit due to the uncertainty of the economic environment,” according to CDPQ.
“We are a long-term investor, so we try not to be deviated by crises,” Jaclot explained. “The synchronised worldwide hit on transport was hard to imagine but now it’s there, it will be in everyone’s minds when you look at airports. We still look at having a diversified portfolio, but obviously would be more conscious of some of the risks in the transport sector.”
One of CDPQ’s most high-profile transport assets is its 12.6 percent share of London’s Heathrow Airport and Jaclot said the asset’s capitalisation structure has helped mitigate some of the effects of the crisis, while it has also taken the opportunity of fewer flights for runway maintenance.
‘We like to create our own infrastructure’
CDPQ’s other trophy transport asset is Montreal’s Réseau Express Métropolitain, and is filling Jaclot with more confidence than Heathrow. The C$6.3 billion light rail greenfield development consists of 67km of rail lines across the city and Jaclot admitted that there is a lot of scrutiny to have this project delivered on time and on budget, and is where much of the scheme’s focus lies.
“We’re very comfortable at CDPQ with greenfield risk,” he said. “We like to create our own infrastructure assets. We’re going to start REM trials on the south bank by end of year. We are looking for more projects like this. We’ve developed a platform and a team of people that are good at developing projects, finding contractors and overseeing those large transport assets.”
CDPQ has also been expanding in other sectors, last week completing the purchase of 73 solar assets in Spain from Q-Energy, which the pension plans to become part of a wider solar platform in the country.
Last month, the pension invested alongside EQT Infrastructure to buy Paris-based nursing home operator Colisée Group, which Jaclot said passed a significant infrastructure test during the height of the pandemic in terms of its resiliency.
“[Colisée] is mostly in France and Belgium where it’s pretty regulated and where most of the revenues come from the state,” he said. “It showed good resilience throughout the crisis, we were able to see it live during our review of this opportunity. It used to be more private equity-like because there were several smaller players fighting to consolidate the market. I think now the scale fits within longer-term ownership like ourselves.”