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File photo of Caisse CEO Michael Sabia. (Mario Beauregard/The Canadian Press Images)
File photo of Caisse CEO Michael Sabia. (Mario Beauregard/The Canadian Press Images)

PENSION FUNDS

Caisse puts its trust (and cash) in Quebec Inc. Add to ...

Caisse de dépôt et placement du Québec continues to bulk up on assets in the province, a move based on economic opportunity that has nothing to do with protectionism, says chief executive officer Michael Sabia.

The fund manager’s assets in Quebec rose by $5.9-billion in 2012, reaching $47.1-billion by the end of the year, the Caisse said on Wednesday as it posted a 9.6-per-cent return last year, boosted by gains in global equities and real estate.

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The 9.6-per-cent return beat the 9.4-per-cent median return of Canadian pension funds for 2012 as calculated by RBC Investor and Treasury Services. It was also above the fund’s internal benchmark of 9.3 per cent, and marks another step in its comeback from the disastrous $40-billion loss in 2008 as the Caisse shifts away from volatile investments to more stable, longer-term assets.

Net assets at the end of 2012 totalled $176.2-billion, up from $159-billion a year earlier. The increase was owing to $14.9-billion in net investment results as well as $2.3-billion in net deposits.

By comparison, the Ontario Municipal Employees Retirement System (OMERS) posted a 10-per-cent return for 2012.

Mr. Sabia and his team say increased investment in Quebec assets makes sense because they are close to home and well-known entities.

But investing to satisfy a government mandate to protect homegrown companies is out of the question, he added.

The nationalist Parti Québécois government has promised to use all means at its disposal – including strengthening the Caisse’s mission of helping Quebec companies to grow – to protect firms from foreign takeover.

Specifically, there have been calls for action to prevent the sale of hardware giant Rona Inc., a major Caisse holding. The struggling company is currently in the throes of a major restructuring and seeking a new CEO after a failed takeover attempt last year by U.S. rival Lowe’s Cos. Inc.

“We draw a very important distinction between two words – development and protectionism,” Mr. Sabia said.

“At the Caisse, we’re in the business of development. We’re not in the protectionism business,” he said. “Our perspective with respect to Rona was – and remains – that this is a company with potential.”

Michel Nadeau, a former senior Caisse executive who is now executive director of the Institute for Governance of Private and Public Organizations, says Mr. Sabia – who was tapped by the former Liberal government in 2009 to turn the Caisse around – appears to have gotten the message on the importance of investing close to home.

“It wasn’t his cup of tea when he when he first arrived. I think he understands now. He appears to be taking the lead so as not to [be forced to] take directives from the government,” Mr. Nadeau said.

Among bigger deals involving Quebec companies last year was a $1-billion investment in CGI Group Inc.

“The Caisse’s return in 2012 shows clearly that the hunt for an optimal return as well as economic development, far from being irreconcilable, go together,” Quebec Finance Minister Nicolas Marceau said in a news release.

Mr. Sabia yesterday warned that Canada’s growth prospects in the near-term “are going to be more challenging than they have been.”

For 2012, the Caisse’s equity class delivered a 12.2-per-cent return while inflation-sensitive investments – including infrastructure and real estate – returned 11.1 per cent.

The fund’s global equity portfolio returned 14 per cent, while Canadian equities provided a 6.6-per-cent return, underperforming its benchmark index by 1.1 per cent. The U.S. and emerging markets portfolios put up returns of 13.5 per cent and 15.8 per cent, respectively.

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