Caisse de depot gets boost from higher interest rates and infrastructure

financialpost.com:

The Caisse de dépôt et placement du Québec posted a 4.2 per cent return for the first half of 2023 despite volatile market conditions, with contributions coming from a fixed-income portfolio that was boosted by both higher interest rates and infrastructure bets that can act as a hedge against inflation.

However, it recorded weaker performance in private equity, following double-digit returns over the past few years, while its office real estate holdings were affected by a structural transformation, including a significant shift to mobile work, offset by investments in the logistics segment of commercial real estate.

The Caisse’s net assets rose to $424 billion as of June 30, 2023, up from $402 billion a year earlier.

“Over the last three years, we’ve adjusted our portfolio to reinforce our capacity to withstand market volatility,” chief executive Charles Emond said in a news release, adding that market conditions reinforce the Caisse’s strategy of diversification and taking a long-term approach. 

“The many contradictory signals confronting investors — the direction of inflation, rates, employment and markets — make the environment challenging.”

Caisse executives said the pension has so far been able to weather trends including tightening credit conditions in the United States and the shift to remote work.

Vincent Delisle, head of liquid markets at the Caisse, said there is still uncertainty when it comes to what central banks will do in terms of setting interest rates, the fund’s large fixed-income portfolio positions the pension manager well.

“Today, with interest rates that are higher than four per cent, (and) credit returns that are 7.5 per cent, for us, that is very attractive when we look at the next five to 10