CANADA - Hedge funds, real estate and fixed income dented la Caisse de dépôt et placement de Québec's otherwise above benchmark returns of 14.6% for 2006.
Despite a very slight decrease in exposure to hedge funds, returns almost halved to 5.7%, down to 68 basis points above benchmark from 507 last year.
Overall returns dropped slightly from 14.7% in 2005
An increased 1% to real estate and 1.1% to real estate debt allocation produced a 20.2% return, 217 basis points above benchmark, whereas in 2005 the 26.4% return was a massive 565 basis points above benchmark.
President and CEO, Henri-Paul Rousseau, commented that the bank would use its size to diversify assets: “The Caisse will also continue to use its excellent credit ratings to contract loans and to finance promising investment opportunities in real estate and private equity.”
However, private equity, despite returning roughly the same 22% return as 2005, when it outperformed the benchmark by 827 basis points, was down to 583 basis points above benchmark in 2006.
Rousseau added the Caisse had actively reduced the weight of bonds in its portfolio and ventured into emerging markets equity.
This slight increase in equity allocation helped, returning 20.9%, up from 17% in 2005. 2006 saw this asset class pull returns from 94 basis points below benchmark to outperform it by 188.
In February, Rosseau warned the 13.8% average return earned over the past three years was not sustainable.
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