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Caisse loses C$40bn in 2008

The Canadian pension fund lost 25% of its value last year leaving it with just C$120bn in assets compared to C$155bn in 2007. Private equity and real estate investments lost 31% and 22% respectively, with Caisse warning its Lone Star investments had performed poorly.

Caisse de dépôt et placement du Québec lost C$39.8 billion (€24.8 billion; $32.2 billion) of its value during 2008 after reporting significant losses in its real estate, private equity and infrastructure investments.

The Canadian pension fund manager, which invests money on behalf of 25 public organisations in the country, said its portfolio fell in value to C$120 billion at the end of 2008, compared to C$155.4 billion in 2007. Real estate recorded losses of 21.9 percent over the past year, while real estate debt made losses of 7.6 percent.

The infrastructure and investments asset class was one of the worst performers for Caisse, with losses of 44.7 percent in 2008, only just beaten by US and emerging market equities which had negative returns of 45 percent respectively.  Private equity returns were minus 31.4 percent for the year.

Unveiling its annual report, Caisse admitted that 2008 would “go down in history as a year of countless challenges”.

In particular, Caisse said its investments in two Lone Star funds had “produced poor returns”. At the start of 2008, Caisse said it would invest $1.5 billion in Lone Star Fund VI and Lone Star Real Estate Fund, both of which are targeting investments in Japan, Europe and the US.

The annual report added that Cadim, a subsidiary of Caisse that manages the pension’s residential and hotel investments, saw the value of its assets “fall substantially” owing to raising cap rates.

Caisse’s actual allocation to real estate was 12 percent at the end of 2008, compared to a target allocation of 9.8 percent. The allocation to private equity was 8.3 percent compared to a target of 8 percent, while infrastructure was under allocated at 3.6 percent against a target of 5.5 percent.

“It will take several years to analyse fully the impacts of the crisis, which, we hope, peaked in the fourth quarter of 2008. Never had we seen such a cataclysm sweep over almost all the world’s asset classes, sectors of activity and markets at the same time,” Caisse’s outgoing chairman Pierre Brunet said in the report.

The losses have prompted Caisse to review its asset allocation group and also restructure its asset-backed commercial paper operations, which took a C$4 billion expense in 2008.

Caisse’s private equity and infrastructure investments include commitments to Cerberus Institutional Partners (Series Four), Oaktree Capital Management’s Opportunities Fund VII, Park Square Capital, ACH Limited Partnership, Enbridge Energy Partners and PNC Financial Services Group