February 25, 2010 / 5:00 PM / in 8 years

UPDATE 2-Caisse says assets under management bounce back

* Quebec’s Caisse posts 10 percent gain in 2009

* Says net assets climbed to C$131.6 billion (Adds quotes, details, background)

TORONTO, Feb 25 (Reuters) - Canada’s biggest pension fund manager, Caisse de depot et placement du Quebec, said on Thursday its assets under management had recovered nearly 10 percent of their value in 2009, but were still below pre-crisis levels.

The Caisse, an arm’s length agency that manages investments for various public and private pension plans in the predominantly French-speaking province of Quebec, said net assets climbed to C$131.6 billion ($123.3 billion) in 2009 from C$120.1 billion a year ago.

This time last year, the pension fund manager reported a C$39.8 billion loss for 2008, from C$155.4 billion in the year-earlier period, prompting the Quebec government to launch an investigation.

“2009 was a year of transition for the Caisse,” President and Chief Executive Michael Sabia said in a statement.

“We rebalanced our portfolio investments and rebuilt our equity positions.”

Sabia was hired a year ago as part of a larger management shake-up in response to the Caisse’s big losses, which slashed the value of the pension fund by 25 percent in one fell swoop.

“We also re-evaluated our real estate portfolios and repositioned our operations in this sector that has been pummeled by strongly declining international markets,” said Sabia, formerly the head of telecoms heavyweight BCE Inc (BCE.TO).

The real estate downturn led the Caisse to lose C$5.7 billion in the first half of the year, forcing the pension fund manager to restructure the group, in part to get out of riskier loans in the mezzanine and other subordinated sector.

Mezzanine loans are unsecured debt subordinated to other debt. The loans are attractive to investors because of higher rates of return and higher fee structures, but they are also less likely to be repaid in the event of bankruptcy.

“The real estate group continued to face challenging international market conditions in 2009, resulting in negative returns,” the Caisse said.

Equity markets recorded a 31.4 percent return, the Caisse said, with the total value of equity market portfolios up about C$20 billion in 2009.

In fixed income, the Caisse said it posted a 5.8 percent return, outperforming benchmark indexes.

The Caisse completed a US$5 billion global debt offering in November as part of a refinancing program aimed at fortifying balance sheets decimated by the global financial crisis.

$1=$1.06 Canadian Reporting by Pav Jordan; editing by Rob Wilson

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