Montreal-based PSP Investments, which manages the $264 billion in federal employee pension plan assets, achieved a return of 7.2% for its fiscal year ended March 31, 2.8 points higher than the year former.
In its annual report released Monday, PSP management attributes this improved performance to “strong performance in investments in listed stocks, infrastructure investments and debt securities.”
These good sector results also helped to mitigate the impact of lower returns obtained in its investments in fixed income securities and natural resource assets, as well as the still very negative return suffered in its real estate investment portfolio.
Despite these short-term pitfalls, PSP management argues that as a pension fund asset manager with “a long-term investment approach,” it continues to exceed its comparable return targets.
Thus, at the end of the 2024 financial year, PSP posted a five-year annualized net return of 7.9%, or 2.6 points higher than its overall portfolio benchmark of 5.3%.
As for its annualized net return over 10 years, PSP announces it at 8.3%, or 1.6 points more than its overall portfolio benchmark of 6.7%.
“What satisfies me most in this annual review is the continuity of our good long-term performance with very strong results not only in public market assets [Stock Exchange], but also with our investments in infrastructure and debt securities,” said Deborah K. Orida, President and CEO of PSP, during an interview with La Presse.
Among the largest segments of its assets under management, the two largest portfolios – fixed income (56.2 billion) and publicly traded equities (55.6 billion) – produced respective returns of 2.9%. and 17.5% in the fiscal year ended March 31.
Furthermore, PSP’s portfolios in private placements ($40.4 billion), infrastructure investments ($34.5 billion) and debt securities ($26.2 billion) achieved returns of 12.1%, 14.3% and 14.2% respectively.
However, these sectoral returns were obscured by the significant underperformance (-15.9%) of its real estate investment portfolio, which stood at 27.2 billion as of March 31.
“In all of our real estate investments, it is the office building sector that has been particularly difficult to manage, mainly due to the impact of changes in working habits. In return, our investments in multi-family residential real estate and industrial real estate were more resilient and efficient,” summarizes Ms. Orida.
In its annual report released Monday, PSP management explains that “the negative revaluation of the [real estate investment] portfolio over the past two years was mainly attributable to higher interest rates and structural changes” in the property sector. real estate.
In particular, underlines PSP, “the traditional office [building] sector, particularly in North America, continues to be largely affected by a deterioration in occupancy rates and rental [income]. This reality reflects the uncertainty surrounding the hybrid work model and is amplified by the scarcity of available funding.”