The Caisse de dépôt et placement du Québec isn’t fulfilling its mandate to achieve optimal investment returns within its investment framework, according to a new report by the Centre for Productivity and Prosperity, a public interest group funded by the Quebec government and the Walter J. Somers Foundation.
“The CDPQ is performing well enough to ensure that depositors are able to meet their short- and long-term financial obligations, but its ability to generate returns since the financial debacle of 2008 has been weak,” said Robert Gagné, the centre’s director and a co-author of the report, in a press release. “In short, there is every indication that the CDPQ is not effectively fulfilling the mandate entrusted to it by the government.”
According to the report, the $401.9 billion investment organization generated 5.6 per cent losses in 2022 and its leading executives collected $10.6 million. These bonuses were based on the claim the fund had outperformed the market average, which the report disputed.
“Because it determines benchmarks in such a way as to evaluate the performance of its managers solely on the basis of the average performance of the markets in which it is present, the CDPQ consciously ignores alternative investment strategies likely to produce better returns,” said Jonathan Deslauriers, the Centre for Productivity and Prosperity’s executive director and a co-author of the report, in the release.
The report also compared the Caisse’s investment performance to the passive index benchmark used by the Canada Pension Plan Investment Board. Based on this analysis, the Caisse’s investment returns have underperformed the benchmark every year since 2008.
“Rather than simply evaluating its performance on the basis of the average return obtained in the markets in which it is active, the CDPQ should propose alternative measures to enable depositors to assess whether active management of their funds is ultimately more profitable than a passive strategy that minimizes operating costs,” said Gagné. “Only under such conditions can the CDPQ legitimately claim to be efficient.”
A statement in response to the Canadian Investment Review‘s request for comment noted the Caisse’s mandate involves securing optimal returns for 48 different depositors with various risk tolerances. “To meet their needs, investment strategies are tailored to the specific risk tolerance and investment policies of each depositor. . . . The Quebec Pension Plan’s basic plan, one of the CDPQ’s largest depositors, is more easily compared to other funds, like the Canada Pension Plan. In this case, the index used by the CDPQ sets a higher level of performance than almost all of its peers.”
During the period between 2009 and 2022, the QPP generated average returns of 8.5 per cent. While the CPPIB generated average returns of 9.7 per cent, the QPP outperformed most of Canada’s largest public sector pension investment organizations, including the Ontario Teachers’ Pension Plan (8.2 per cent) and the Alberta Investment Management Corp. (seven per cent).