November 25, 2008 / 2:03 PM / 10 years ago

Caisse selloff spurred by hedging losses-paper

TORONTO, Nov 25 (Reuters) - The Caisse de depot et placement du Quebec has been forced to offload C$10 billion ($8.1 billion) of stocks into a slumping market to free up cash, the Globe and Mail newspaper said on Tuesday.

The paper, citing unnamed sources, said Canada’s largest pension fund manager began the year with C$155.4 billion of assets, but has sold billions in equities over the past two months after taking losses on currency hedging and derivatives, as well as international real estate and private equity.

The paper said the fund’s hedging strategy took a hit from the recent sharp decline of the Canadian dollar.

The arm’s-length government agency manages investments for various public and private pension plans. Since the fund manages the retirement savings of Quebeckers, the idea of losses eating into pension checks has become a hot topic in the province’s three-week old election campaign.

In a press conference on Friday, Caisse Chairman Pierre Brunet and interim Chief Executive Fernand Perreault said the Caisse had $20 billion in cash for short-term investments.

Pension funds have been losing money as stock markets decline, but the liquidity squeeze is more acute for the Caisse, because the fund has C$13 billion of asset-backed commercial paper that has been frozen since August 2007 due to the credit crunch, the Globe and Mail said.

Last week, the Caisse said in a statement it is converting certain international equity portfolios that were actively managed in Montreal to passive, index-based portfolios, and that 10 employees will lose their jobs.

The fund also said its president and chief executive, Richard Guay, is off work for four weeks on his physician’s advice.

A spokesman for the Caisse was not immediately available for comment. ($1=$1.23 Canadian) (Reporting by John McCrank; Editing by Steve Orlofsky)

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