La Caisse posts 13.2% infra return for 2014

The Canadian pension’s infrastructure portfolio has more than doubled since 2010. Overall, the pension delivered a return of 12%.

La Caisse de dépôt et placement du Québec (La Caisse) reported a 12 percent return for the year ending December 31, 2014, which generated C$23.8 billion (€17.0 billion; $19.0 billion) in net investment results, the Montreal-based pension fund said in a recent statement.

Over a four-year period, its total portfolio, which at the end of last year stood at C$225.9 billion, delivered a weighted average return of 9.6 percent.

The pension fund’s infrastructure portfolio, which represents about 4 percent of total assets under management, also posted strong results, achieving a return of 13.2 percent for 2014 and a 13.8 percent annualised return over a four-year period, returns that exceed the long-term target.

In its statement, La Caisse noted that infrastructure is “central to its investment strategy, especially in an environment of low interest rates and greater volatility in the equity markets”.

La Caisse has more than doubled the size of its infrastructure portfolio from C$4.3 billion in 2010 to more than C$10 billion at the end of 2014. Last year alone, it acquired a more than 30 percent interest in Indianapolis Power & Light, a 24.7 percent stake in wind power developer Invenergy and a 25 percent interest in London Array, the world’s largest offshore wind farm – acquisitions worth C$1.3 billion.

According to La Caisse, the significant growth of its infrastructure portfolio has enabled the pension fund to diversify the portfolio both in terms of sector and geography. La Caisse plans to focus more on North America and Australia and less on Europe going forward.

Macky Tall, senior vice president, private equity and infrastructure, told Infrastructure Investor in a recent interview that La Caisse has identified Mexico, Brazil and India as growth markets that are of interest.

“We’re very serious about growth markets – not just in infrastructure but overall as an organisation,” Tall said. La Caisse appointed Rashad Kaldany, previously chief operating officer of the International Finance Corporation (IFC), in August 2013 as executive vice president of emerging markets to lead that effort.

In addition to expanding its activities abroad, the pension fund is also planning to become more active in its home market, following an agreement signed with the government of Québec. The agreement, announced in January and pending approval from the National Assembly, will expand La Caisse’s role to execute major infrastructure projects in the Canadian province from planning through operation.

La Caisse plans to establish a new subsidiary, CDPQ Infra, which will play a pivotal role in this new model, carrying out public infrastructure projects, the way its subsidiary Ivanhoé Cambridge does in the real estate sector.

“The expected increase in volatility in equity markets and the low yields expected in bond markets reinforce the importance of these more resilient assets in La Caisse’s overall portfolio,” the pension fund said in its earnings statement in reference to the other two portfolios that along with infrastructure comprise its inflation-sensitive asset category – real estate and real return bonds.