Canada’s Caisse concerned about China slowdown

19 August 2014   Category: News, Asia, China, Global, Canada   By Daniel Shane

The head of the Caisse de dépôt et placement du Québec (Caisse), the Canadian pension fund that manages assets totalling C$214.7 billion (US$197.24 billion), has warned that it could face headwinds amid stuttering economic growth in China and emerging markets. 

In a performance update covering the year-to-date up to June 30, the Montreal-based fund said its four-year average annual return stood at 11.1%, generating net investment results of C$71.5 billion. The weighted average for return on clients’ funds stood at 6.7% for the first six months of the year.

Michael Sabia, chief executive officer of Caisse, however warned in a conference call that flagging global growth outside of the US and geopolitical risks would threaten investment returns going forward.

“The global investment environment is becoming more demanding,” Mr. Sabia said, according to The Globe and Mail. “In China and emerging markets, we’re not suggesting there’s a crisis and things are going to become unstuck, but their capacity to motor the global economy forward is not what it used to be a little while ago.”

Mr. Sabia warned the US was the “single motor working in the global economy”, while growth rates in other developed markets in Europe were “extremely fragile”. He also expressed concerns over conflicts in the Middle East and Ukraine causing “a further weight and further headwind for the global economic growth”.

He continued that Caisse was “very focussed” on finding higher return investment opportunities in emerging markets including Mexico and India, as well as using allocations in Australia as a “surrogate” for getting more exposure to Asian markets.

In June this year, Caisse said it planned to open a headquarters in Singapore within the next five years, in addition to new offices in Washington and Mexico City. It currently has a location in Beijing, and also plans to establish branches in Mumbai and Sydney in future.

Mr. Sabia has previously said that Caisse and other pension managers in Canada were increasingly looking at Asia in order to diversify their investment portfolios.

The Ontario Teachers’ Pension Plan, another major pension manager in the country, last year opened its first office in Hong Kong.

“Frankly, we have some catching up to do. When I look at my friends at [the] Canada Pension Plan Investment Board in Toronto, they have offices pretty widely distributed all over the world, with many people in them,” Mr. Sabia said earlier this year.