February 24, 2017 / 4:02 PM / a year ago

Quebec's Caisse reports lower return in 2016 than year before

TORONTO, Feb 24 (Reuters) - Caisse de depot et placement du Quebec, Canada’s second-biggest public pension fund, reported an average return on its investments of 7.6 percent in 2016, a lower return than the year before, reflecting challenging economic conditions.

The Caisse, which manages pension plans in the mostly French-speaking province, said its net assets rose to C$271 billion ($207 billion) at the end of 2016, compared with C$248 billion at the end of 2015.

The performance showed a weakening trend, however. In 2015 the Caisse achieved an average return of 9.1 percent and in 2014 it achieved an average return of 12 percent.

“On the economic front, the fundamental issue remains the same: slow global growth, exacerbated by low business investment. At the same time, there are also significant geopolitical risks,” Chief Executive Michael Sabia said.

“Given the relative complacency of markets, we need to adopt a prudent approach,” he added.

Canada’s biggest public pension plans have grown rapidly in recent years through a strategy of directly investing in private equity, infrastructure and real estate assets to diversify away from public equity and fixed income markets.

Sabia said the Caisse would continue to invest more in less liquid assets such as private equity investments, infrastructure and real estate and less in fixed-income instruments which have been generating lower returns.

He said the fund is targeting having 30 to 35 percent of its investment in less-liquid assets in “roughly four to five years,” compared with 28 percent currently. ($1 = 1.3097 Canadian dollars) (Reporting by Matt Scuffham and Allison Lampert; Editing by Meredith Mazzilli)

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