The Public Sector Pension Investment Board saw a negative 0.6 per cent return for its last fiscal year, which ended March 31, 2020.
Severe market declines in the lead up to the end of March took a heavy toll. However, the fund did outperform its reference portfolio’s benchmark, which posted a negative 2.2 per cent loss. In dollar terms, the PSP now holds $169.8 billion in net assets under management, representing a 1.1 per cent increase from the $168 billion it held the year prior.
“I want to thank the PSP Investments team for their work safeguarding the investments made on behalf of the public sector pension plans, many of whose members are among the frontline heroes actively supporting Canadians during the COVID-19 pandemic,” said Neil Cunningham, president and chief executive officer at PSP Investments, in a press release.
“Despite the decline in equity markets before the year-end, we were able to exceed the reference portfolio for the fiscal year and maintain a long-term return of 8.5 per cent, which outperformed both the 10-year reference portfolio return of 7.2 per cent and the 5.7 per cent long-term return objective.”
Looking at specific asset classes, natural resources posted the lowest returns at negative 5.2 per cent for the fiscal year. “Performance for the current year was dampened by COVID-19, which significantly impacted the carrying value of the group’s non-core oil and gas assets,” noted the release. “The crisis did not have a significant impact on our core agriculture and timberland investments.”
Real estate, which posted negative 4.4 per cent, was also a drag on the portfolio. “The pandemic significantly impacted the value of the global retail portfolio and, more specifically, the malls in the U.S,” added the release. “The Alberta office portfolio was particularly impacted by the pandemic and the drop in oil prices that exacerbated the negative sentiment on the Alberta economy. The impact on our global industrial assets was more subdued as the sector produced a positive return.”
Public markets, including absolute return strategies, posted negative three per cent. Other assets, however, didn’t suffer so severely. Infrastructure saw the most robust performance, posting an 8.7 per cent return, followed by private equity (5.2 per cent) and credit investments (4.3 per cent). “Infrastructure deployment was mostly across North America and Australia and included new direct and co-investments totalling $2.3 billion.”
Although the portfolio saw negative returns for the year overall, Eduard van Gelderen, senior vice-president and chief investment officer at PSP, noted the long-term strategies employed by the fund have served it well, both during the coronavirus pandemic and more generally. “Before the pandemic, we were preparing for an eventual market downturn after many years of sustained growth in order to be able to respond quickly if a crisis occurred. Our strategies have proven their effectiveness in maintaining our portfolio’s stability and liquidity during tumultuous times.”