'The next few months could be challenging in terms of inflation numbers in the US. US economy looks soft under the surface,' warns La Caisse's EVP and head of liquid markets
La Caisse de dépôt et placement du Québec (formerly CDPQ) reported their mid-year results on Tuesday, delivering a 4.6 per cent return in the first half of 2025 and outperforming its benchmark portfolio’s 4.3 per cent gain.
However, La Caisse's executives still emphasized that the first half of 2025 was marked by volatility, driven largely by US tariff policy and April’s market correction, while equities rebounded sharply in the second quarter.
As of June 30, 2025, La Caisse’s net assets totaled $496 billion, up $23 billion in six months.
“We had contingency plans that identified the moment when it would be most opportunistic to increase the risk level of opportunity of the different portfolios. We did that around Liberation Day, when there was a market panic. The impact of that was that we increased our exposure to stock markets and we took more risks in the credit portfolio as well. The markets have rebounded very robustly since, but it was not an opportunity that we're happy to have taken,” noted Vincent Delisle, La Caisse’s executive vice-president and head of liquid markets, during the pension fund’s press conference.
“We reduced the risk level with regards to the liquid portfolios, but we've also increased our liquidities, and that made it possible for us to put together a market plan when there was a strong correction, when the tariffs were announced, to re-inject in the bottom of the market and to benefit from the rebound,” added president and CEO of La Caisse Charles Emond.
As a result, La Caisse increased the liquidity minimum threshold to be agile and perform when the opportunity would present itself. Pointing to currencies, Emond noted the fund was able to cover the drop in the US dollar that made it possible to mitigate that evaluation.
“In terms of risk level, market events, currencies, liquidities, what happened is kind of a historical correlation that we see between the stock markets, the currencies, and the level of the American dollar. That broke down and led teams have a lot of discussions to be able to act in a very atypical environment. And that paid off, and it was beneficial,” he added.
Currency movements were also a headwind in the first half of 2025, particularly due to a weaker US dollar. Partial hedging offset nearly half of the negative impact. Over five years, currency exposure has been a net positive due to earlier dollar strength.
“Because of the currencies, it's an element where there were important decisions made in the volatile environment, and that will probably make possible for us to stand out even more in the overall performance from the beginning of the year,” noted Emond in the conference.
However, despite the pension fund’s overall performance, Emond emphasized a cautious outlook for the remainder of the year, emphasizing that institutional investors should “remain vigilant as we have yet to see the full effects of the US administration’s measures,” he said in the fund's press release.
“We have the means to move our positions from the geographical exposure. Odds are we have a little bit less appetite for US in public equities over the next few years… The rally from Liberation Day was one of the strongest rallies without coming out of a recession. There’s a lot of hope in this market,” added Delisle in the conference.
“The markets rebounded significantly. Our view is the next few months could be challenging in terms of inflation numbers in the US. US economy looks soft under the surface. Our view from public equity markets is much more cautious for the remainder of the year,” he added.
Over the past five years, the Canadian institutional investor’s annualized return reached 7.7 per cent, beating the 6.6 per cent benchmark and exceeding the return requirements of its depositors. Ten-year performance also came in strong at 7.0 per cent versus 6.4 per cent for the benchmark.
La Caisse’s equity markets portfolio returned 6.0 per cent compared to 5.5 per cent for its benchmark, aided by strong performance in Canada, Europe, and emerging markets. Over five years, equities posted a 13.3 per cent annualized return, driven by exposure to major technology names and growth in Canadian holdings.
Consequently, La Caisse’s private equity portfolio delivered a 3.4 per cent six-month return versus 2.0 per cent for its benchmark, supported by profitability gains in portfolio companies and selective exits. Over five years, it returned 16.7 per cent annually, with technology, finance, and industrial holdings contributing significantly.
Meanwhile, fixed income generated a 3.9 per cent six-month return against the benchmark’s 3.0 per cent, helped by a high current yield and strong execution in government debt and corporate credit. Over five years, returns averaged 0.2 per cent, still recovering from 2022’s market correction but ahead of the index’s -0.8 per cent.
The pension fund's infrastructure portfolio continued to provide steady returns in a turbulent environment, returning 4.5 per cent in the first half. While trailing the benchmark’s 8.1 per cent - boosted by public equities benefiting from AI-driven energy demand - the portfolio’s long-term performance remains strong, with an 11.2 per cent annualized return over five years.
The pension fund’s real estate portfolio posted a modest 0.1 per cent first-half return versus 1.2 per cent for its benchmark. Values have largely stabilized, with shopping centers and office properties delivering steady yields.
Over five years, returns for real estate have been flat at 0.3 per cent, reflecting industry-wide structural and cyclical challenges. However, since 2020, the portfolio has been repositioned toward logistics and other growth sectors, which has helped temper headwinds from US office exposure.
“Against significant rate increases, stock market concentration and challenges in real estate over the past five years, our portfolio held strong and outperformed its benchmark portfolio. Our depositors’ plans, and therefore Quebecers’ pensions, are in excellent financial health,” Emond said in a statement.
