CANADA - Caisse de dépôt et placement du Québec is set to restructure its real estate division after it lost C$5.7bn (US$5.2bn) in the first half of the year.
The scheme said it would no longer invest in mezzanine and other subordinated loans in an effort to focus more on its core operations.
It said unrealised losses in real estate debt totalled C$2.2bn; real estate properties, C$1.8bn; private equity infrastructure, C$1.3bn and asset backed commercial paper, C$400m.
Caisse president and chief executive Michael Sabia said: "Considering the scale of decreases in value we have accounted for, primarily in real estate, and the fact that the Caisse's returns are of great importance to Quebecers, we felt it was the right time to take stock of the situation."
The manager will merge its Cadim division, which invests in multi-residential properties and hotels, into its SITQ subsidiary. SITQ invests in the office buildings and business parks sector.
Until 2008, Cadim also invested in subordinated loans, including mezzanine loans, but that has now been terminated.
Sabia said: "The investment model adopted by Cadim was aimed at seeking higher returns through increased risk. In the real estate financing sector, Cadim's strategy was based on forecasts calling for marked growth of the subordinated loans market. The financial crisis, however, eroded market conditions needed to underpin that strategy, namely in the United States."
Sabia became chief executive in March and took over an organisation that had come under scrutiny for record losses and losses related to risky investments in commercial asset backed securities. The fund manager lost C$39.8bn in assets in 2008.
The losses led ratings agencies like Standard & Poor's to give the firm a AAA rating, but attached an outlook "with negative implications".
Sabia has since overhauled its risk management system and restructured staff to focus more on core investments and streamline the operation. As a result, S&P upgraded its outlook to stable.
As part of the real estate reorganisation, René Tremblay was named executive vice-president of real estate, and president of the real estate group.
Karen Laflamme is now senior vice president of real estate and André Charest is now senior vice president of risk management for real estate.
The People's Pension, Atlas Master Trust and The Cheviot Trust have been granted authorisation from The Pensions Regulator (TPR), taking the total number of authorised master trusts to 18.
Pension schemes have been warned they may now face a more challenging legal test if they wish to fix drafting errors.
The Greene King Pension Scheme has appointed XPS Pensions as its actuarial and investment adviser following a competitive tender process.
Professional Pensions has compiled a list charting the progress of master trust authorisation. View our list in full here...