Caisse to boost private credit

Canada’s second-largest pension manager is planning to boost investments in private credit and infrastructure after reaping big gains in equities in the first half.

The plan for Caisse de dépôt et placement du Québec includes adding personnel. “We’re looking to hire in private debt, and the other area where we’ve hired the most is infrastructure, as we actually plan to nearly double this for the next two to three years,” Caisse chief executive Charles Emond said Wednesday in an interview.

Caisse manages $389.7 billion in pension and insurance money on behalf of the Quebec government, which runs its own universal pension plan. It posted a 5.6-per-cent return in the first six months thanks to a 12.1-per-cent gain in private and public equities, which offset a small loss in the bond portfolio.

About two-thirds of its fixed income assets are now in private credit, Emond said, a shift that has included real estate loans and credit for infrastructure projects and businesses.

“I’m not the least worried about this portfolio because it’s one of the most stable,” he said. “Without sticking my neck out too much, this portfolio is already turning the tide and entering net

THIS PORTFOLIO IS ALREADY TURNING THE TIDE.

positive territory.”

The pension fund said Wednesday that its real assets portfolio, which includes both infrastructure and real estate, rose 4.1 per cent in the first six months of this year, beating its benchmark of 0.4 per cent, mainly on the strength of returns in logistics assets, renewable energy and telecommunications.

Caisse has also changed its approach to stock markets after being too defensive, Emond said. It’s now trying to find a “better balance” between value, growth and quality stocks, and has added exposure to growth companies, he said.

The fund has doubled its position in technology stocks, to $8 billion, he said, which translates into seven per cent of the public stock portfolio versus three per cent previously. That compares with a 10-per-cent weighting in technology stocks in the fund’s benchmark.

“I wouldn’t characterize us as risk-takers. We may have been slightly too defensive, applying the same strategy in all market environments,” Emond said.

In technology, “some of those stocks have high valuations,” Emond said. “I thought it was risky to ignore those. And at the same time, we’re not chasing them to just exactly be in line with the index, as we have our own conviction.”