Caisse de dépôt et placement du Québec
Encyclopedia
The Caisse de dépôt et placement du Québec (CDPQ) manages public pension
plans in the Canadian
province of Quebec
. It was founded in 1965 by an act of the National Assembly
. The name translates to Quebec Deposit and Investment Fund, but it is referred to by its full French name or as "the Caisse" in English.
The Caisse is headquartered in Quebec City
in the Price building
and has its major business office in Montreal
in the Quartier International de Montreal
.
The Caisse's large holdings make it a formidable player in investment markets. It is the second largest pension fund
in Canada, with the Canada Pension Plan
(CPP) in first place. As of November, 2011, the Caisse’s total assets under management
amounted to CA$151.7 billion.
Henri-Paul Rousseau, who previously headed Laurentian Bank, served as the Caisse's President and CEO from 2002 to mid 2008, when he left to become a vice chairman at the Power Corporation of Canada
. His successor was the fund's second-in-command and CIO (Chief Investment Officer), Richard Guay, who only served as CEO for four months before abruptly resigning on stress leave. The board chairman Pierre Brunet, a former head of National Bank of Canada
securities prior to joining the Caisse, did not have his mandate renewed.
Under Rousseau's tenure, there was a dramatic shift in the investment objectives. The fund became a major player in derivatives, invested heavily in non-bank asset-backed commercial paper (ABCP). It also adopted aggressive currency hedging as an investment strategy in itself, rather than as a strictly defensive measure to protect itself against swings in the exchange rate. In the financial crisis of 2007–2010, all of those strategies backfired against the Caisse, adding to the significant stock market losses that the Caisse and other pension funds suffered. Additional writedowns on the Caisse's remaining holding of $12.6-billion in ABCP and losses on dollar hedging and futures contracts led to the fund's assets to drop by $39.8 billion CAD.
The $39.8 billion loss is a minus-26-per-cent return, making it the worst in the Caisse's 43-year history (In 2002, the Caisse had suffered a minus-9.4-per-cent return, its second worst year). Other large pension funds in Canada were projected to report a minus-18.5-per-cent loss for 2008. The 2008 annual report of the Caisse show that zero bonuses were paid for 2008.
On September 11, 2009, the rating agency Moody's
has affirmed the Aaa long-term and Prime-1 short-term credit ratings of CDP Financial and has maintained its “stable outlook”. These ratings are the highest assigned by the agency.
In August, after $5.7 billion in losses wiped out other gains during the first half of 2009, the Caisse is set to post a return on investments of about 5 percent to 6 percent this year, compared with an average gain of 10 percent to 12 percent for Canadian pension funds.
) Jacques Parizeau
.
In the 1967 annual report, then Caisse chairman Claude Prieur wrote: “Between two investments of similar quality and price, the one that seems most susceptible of favouring the economic development of the province is preferred, even if, in doing so, it is necessary to sacrifice somewhat the diversification of the portfolio.”
When Rousseau took over from Jean-Claude Scraire as the CEO of the Caisse, he steered the fund away from its traditional role of favouring Quebec businesses, making returns the first priority. This surprised many observers, as Rousseau had been a strong Quebec nationalist, once leading a pro-sovereignty group called Les Économistes pour le OUI, and being a close friend of former Parti Québécois
premier Lucien Bouchard
. And during the time that he headed Laurentian Bank, he criticised then-Caisse CEO Jean-Claude Scraire for not investing more of Quebeckers' pension money in Laurentian Bank shares. However, when Jean Charest
became premier in 2003, he passed legislation that explicitly spelled out the Caisse's mandate for the first time. The law stipulated the Caisse is to seek “optimal” returns “while at the same time contributing to Quebec's economic development.”
Quebec Premier Jean Charest
came under heavy fire when the $39.8 billion loss was revealed, with some accusing him of calling the 2008 snap election prior to the Caisse's troubles becoming public.
Some suggested that there was too much political influence on the Caisse, with the board of directors being appointed by the province. Chairman Pierre Brunet said that the CEO "has to understand the Quebec environment" and requires a "a thorough knowledge of the socioeconomic and political issues of Quebec." The Caisse is still beholden to its legacy as a creation of the Quiet Revolution
.
Pension
In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...
plans in the Canadian
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
province of Quebec
Quebec
Quebec or is a province in east-central Canada. It is the only Canadian province with a predominantly French-speaking population and the only one whose sole official language is French at the provincial level....
. It was founded in 1965 by an act of the National Assembly
National Assembly of Quebec
The National Assembly of Quebec is the legislative body of the Province of Quebec. The Lieutenant Governor and the National Assembly compose the Parliament of Quebec, which operates in a fashion similar to those of other British-style parliamentary systems.The National Assembly was formerly the...
. The name translates to Quebec Deposit and Investment Fund, but it is referred to by its full French name or as "the Caisse" in English.
The Caisse is headquartered in Quebec City
Quebec City
Quebec , also Québec, Quebec City or Québec City is the capital of the Canadian province of Quebec and is located within the Capitale-Nationale region. It is the second most populous city in Quebec after Montreal, which is about to the southwest...
in the Price building
Edifice Price
The Édifice Price is an 18-floor skyscraper in Quebec City, Canada. Built in 1930-1931 amid controversy for Price Brothers ltd., it is the tallest building in the Old Quebec historical district, and one of the oldest skyscrapers in Canada...
and has its major business office in Montreal
Montreal
Montreal is a city in Canada. It is the largest city in the province of Quebec, the second-largest city in Canada and the seventh largest in North America...
in the Quartier International de Montreal
Quartier international de Montréal
The Quartier international de Montréal or Montreal's International District is a district of the Ville-Marie borough of downtown Montreal that underwent a major urban renewal as a central business district in 2000–2003.-Purpose:...
.
The Caisse's large holdings make it a formidable player in investment markets. It is the second largest pension fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...
in Canada, with the Canada Pension Plan
Canada Pension Plan
The Canada Pension Plan is a contributory, earnings-related social insurance program. It forms one of the two major components of Canada's public retirement income system, the other component being Old Age Security...
(CPP) in first place. As of November, 2011, the Caisse’s total assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
amounted to CA$151.7 billion.
History
Jean-Claude Scraire spent 22 years with the Caisse de dépôt et placement du Québec. He stepped down in 2002 after eight years as CEO of Canada’s biggest pension fund, which at the time managed more than $140 billion in assets.Henri-Paul Rousseau, who previously headed Laurentian Bank, served as the Caisse's President and CEO from 2002 to mid 2008, when he left to become a vice chairman at the Power Corporation of Canada
Power Corporation of Canada
Power Corporation of Canada is a Canadian company with assets in North America and Europe in a number of industries. These industries include media, pulp and paper, and financial services....
. His successor was the fund's second-in-command and CIO (Chief Investment Officer), Richard Guay, who only served as CEO for four months before abruptly resigning on stress leave. The board chairman Pierre Brunet, a former head of National Bank of Canada
National Bank of Canada
National Bank of Canada is the 6th largest bank and 8th largest financial institution in Canada. The bank's headquarters are in Montreal, Quebec....
securities prior to joining the Caisse, did not have his mandate renewed.
Under Rousseau's tenure, there was a dramatic shift in the investment objectives. The fund became a major player in derivatives, invested heavily in non-bank asset-backed commercial paper (ABCP). It also adopted aggressive currency hedging as an investment strategy in itself, rather than as a strictly defensive measure to protect itself against swings in the exchange rate. In the financial crisis of 2007–2010, all of those strategies backfired against the Caisse, adding to the significant stock market losses that the Caisse and other pension funds suffered. Additional writedowns on the Caisse's remaining holding of $12.6-billion in ABCP and losses on dollar hedging and futures contracts led to the fund's assets to drop by $39.8 billion CAD.
The $39.8 billion loss is a minus-26-per-cent return, making it the worst in the Caisse's 43-year history (In 2002, the Caisse had suffered a minus-9.4-per-cent return, its second worst year). Other large pension funds in Canada were projected to report a minus-18.5-per-cent loss for 2008. The 2008 annual report of the Caisse show that zero bonuses were paid for 2008.
On September 11, 2009, the rating agency Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
has affirmed the Aaa long-term and Prime-1 short-term credit ratings of CDP Financial and has maintained its “stable outlook”. These ratings are the highest assigned by the agency.
In August, after $5.7 billion in losses wiped out other gains during the first half of 2009, the Caisse is set to post a return on investments of about 5 percent to 6 percent this year, compared with an average gain of 10 percent to 12 percent for Canadian pension funds.
Political Influence
The Caisse was created in the 1960s on the advice of economist (and future PremierPremier of Quebec
The Premier of Quebec is the first minister of the Canadian province of Quebec. The Premier is the province's head of government and his title is Premier and President of the Executive Council....
) Jacques Parizeau
Jacques Parizeau
Jacques Parizeau, is an economist and noted Quebec sovereignist who was the 26th Premier of the Canadian province of Quebec from September 26, 1994 to January 29, 1996.-Early life and career:...
.
In the 1967 annual report, then Caisse chairman Claude Prieur wrote: “Between two investments of similar quality and price, the one that seems most susceptible of favouring the economic development of the province is preferred, even if, in doing so, it is necessary to sacrifice somewhat the diversification of the portfolio.”
When Rousseau took over from Jean-Claude Scraire as the CEO of the Caisse, he steered the fund away from its traditional role of favouring Quebec businesses, making returns the first priority. This surprised many observers, as Rousseau had been a strong Quebec nationalist, once leading a pro-sovereignty group called Les Économistes pour le OUI, and being a close friend of former Parti Québécois
Parti Québécois
The Parti Québécois is a centre-left political party that advocates national sovereignty for the province of Quebec and secession from Canada. The Party traditionally has support from the labour movement. Unlike many other social-democratic parties, its ties with the labour movement are informal...
premier Lucien Bouchard
Lucien Bouchard
Lucien Bouchard, is a Canadian lawyer, diplomat, politician and former Minister of the Environment of the Canadian Federal Government. He was the Leader of Opposition in the Canadian House of Commons from 1993 to 1996, and the 27th Premier of Quebec from January 29, 1996 to March 8, 2001...
. And during the time that he headed Laurentian Bank, he criticised then-Caisse CEO Jean-Claude Scraire for not investing more of Quebeckers' pension money in Laurentian Bank shares. However, when Jean Charest
Jean Charest
John James "Jean" Charest, PC, MNA is a Canadian politician who has been the 29th Premier of Quebec since 2003. He was leader of the federal Progressive Conservative Party of Canada from 1993 to 1998 and has been leader of the Quebec Liberal Party since 1998....
became premier in 2003, he passed legislation that explicitly spelled out the Caisse's mandate for the first time. The law stipulated the Caisse is to seek “optimal” returns “while at the same time contributing to Quebec's economic development.”
Quebec Premier Jean Charest
Jean Charest
John James "Jean" Charest, PC, MNA is a Canadian politician who has been the 29th Premier of Quebec since 2003. He was leader of the federal Progressive Conservative Party of Canada from 1993 to 1998 and has been leader of the Quebec Liberal Party since 1998....
came under heavy fire when the $39.8 billion loss was revealed, with some accusing him of calling the 2008 snap election prior to the Caisse's troubles becoming public.
Some suggested that there was too much political influence on the Caisse, with the board of directors being appointed by the province. Chairman Pierre Brunet said that the CEO "has to understand the Quebec environment" and requires a "a thorough knowledge of the socioeconomic and political issues of Quebec." The Caisse is still beholden to its legacy as a creation of the Quiet Revolution
Quiet Revolution
The Quiet Revolution was the 1960s period of intense change in Quebec, Canada, characterized by the rapid and effective secularization of society, the creation of a welfare state and a re-alignment of politics into federalist and separatist factions...
.