Caisse de Dépôt et Placement du Québec's private equity portfolio soared in 2010, returning 26.7 percent, making it the highest-performing asset class in the portfolio.
The C$17.5 billion portfolio posted such strong returns because of improvements in operational performance, debt reduction and higher profits of portfolio companies, Caisse said in a statement. Leveraged buyout financing activities contributed almost half of the portfolio's performance, Caisse said.
“The private equity portfolio … significantly benefited from the global recovery in mergers and acquisitions and the rebound of financings in this area,” Caisse said.
In 2010, Caisse established an independent portfolio sub-allocation to infrastructure, which ended the year at C$4.3 billion (€3.2 billion; $4.4 billion), or nearly 3 percent of its portfolio. The portfolio was grouped with Caisse’s private equity portfolio until 30 June and was split up into a stand-alone group effective 1 June, meaning that infrastructure’s 25.4 percent return also reflects six months of private equity returns.
In addition to splitting up its private equity and infrastructure investments, Caisse deleveraged both portfolios. The pension said in a statement that it “completely” eliminated $6.7 billion of outstanding debt on its private equity and infrastructure portfolios.
Caisse said in a statement the debt reduction was part of an effort to improve its risk management in 2010.
The pension also deleveraged its real estate portfolio by eliminating C$3.7 billion of debt. The C$16.7 billion portfolio, which sits alongside infrastructure within a larger “Inflation-Sensitive Investments” asset class, returned 13.4 percent in 2010.
Infrastructure returned 25.4 percent in 2010 for Caisse de Dépôt et Placement du Québec, the Canadian province’s public pension manager, outperforming its benchmark by 14.1 percent and beating every other asset class except private equity.
“The gradual reopening of credit markets triggered a rebound in activity in the infrastructure sector during 2010,” Caisse said in a statement analysing its results. “In addition, the sector’s resilience during the last economic cycle encouraged institutional investors to increase their infrastructure weighing in their portfolios.”
Caisse said its energy and airport assets were “particularly” resilient during the financial crisis. These include BAA, which manages six airports in the UK, including the largest, Heathrow, and Enbridge Energy Partners, a Texas-based natural gas pipeline operator.
The pension’s portfolio posted an overall return of 13.6 percent in 2010, a level which placed its portfolio value near its pre-crisis peak of C$155.4 billion in 2007. As of 31 December 2010, Caisse’s portfolio was worth C$151.7 billion, a rebound of 26 percent from its low of $120.1 billion at the end of 2008.