Caisse pension fund lost $39.8 billion in 2008

Wed Feb 25, 2009 4:06pm EST
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By David Ljunggren

OTTAWA (Reuters) - Canada's biggest pension fund manager, Caisse de depot et placement du Quebec, said on Wednesday it had lost a massive C$39.8 billion ($31.6 billion) in 2008, prompting the Quebec government to announce an investigation into what happened.

The Caisse, an arm's length agency that manages investments for various public and private pension plans in the predominantly French-speaking province, blamed tumbling stock prices and a depreciating Canadian dollar for its record loss.

The fund manager posted a negative return of 25 percent for 2008 and saw its depositors' net assets decline to C$120.1 billion from C$155.4 billion.

Earlier this week, the Ontario Municipal Employees Retirement System (OMERS) reported a negative 15.3 percent total rate of return for last year, compared with a positive return of 8.7 percent in 2007.

The median return for large Canadian pension funds in 2008 was a drop of 18.4 percent.

Part of the reason for the Caisse's weak results were currency hedges that went wrong because the Canadian dollar fell faster than expected and the fund's decision to buy C$12.6 billion of asset-backed commercial paper (ABCP), the market for which froze up in August 2007.

Caisse interim Chief Executive Fernand Perreault apologized for the ABCP investment, said the fund would clamp down on the way it managed risk and announced the Caisse had changed its asset portfolio to reduce its exposure to equities.

But he put most of the blame on the global crisis, which he said had caused havoc from October onward.   Continued...

<p>A woman walks out of the Caisse de depot et placement du Quebec head office in Quebec City February 25, 2009. REUTERS/Mathieu Belanger</p>