Caisse calls to step up in investment as Canadian economy faces oil woes

MONTREAL -- Canada needs a stepped-up infusion of public and private investment to help its economy overcome the punishing impact of low oil prices, which won't enjoy a big rebound amid global uncertainty, the head of the Caisse de depot said Wednesday.

See Full Article

The high level of uncertainty is caused by several factors, including the return of Iran to oil markets, reaction to the rise of U.S. shale, output decisions by Saudi Arabia and oil production in Russia -- all of which make it difficult to predict future prices.

"It's probably likely that we're getting closer to a floor on oil prices, but where is that floor and when will we find it and when will we begin to see a step-by-step improvement in the price of oil -- that's not clear," CEO Michael Sabia said after releasing the pension fund manager's 2015 results.

He said Quebec's largest pension fund manager is open to investing more in Bombardier, although it has no immediate plans to do so after spending US$1.5 billion for a 30-per-cent stake in the transportation company's railway division.

"We have an important investment in a subsidiary of Bombardier. For now, that represents significant exposure," he said, adding he supports government investment in Bombardier's CSeries commercial aircraft as a way to reduce the company's risk.

"If those risks get reduced I think you'll probably see some change in the valuation of the company so I think that's the catalyst. It's a risk-reduction story."

Sabia expects global financial volatility will continue over the next few years as countries adjust to the withdrawal of monetary stimulus and anemic global growth.

"The party's probably over in terms of double digit returns that we've all gotten very comfortable with over the last number of years."

Despite market volatility, the Caisse generated a 9.1 per cent return on investments last year as its net assets grew to $248 billion, mainly due to a $20.1-billion increase in net investments.

The gains last year were smaller than the 12 per cent earned in 2014, but it beat the 6.7 per cent growth in the reference index of returns by private and public institutions.

Although it can't be immunized from market downturns, Sabia said the Caisse has repositioned itself and changed the way it invests to cushion any blows.

He wouldn't predict if high single-digit returns are sustainable, but said it aims to generate six to 6.5 per cent annual return over the long term to meet the needs of depositors.

Faced with uncertain public markets and lower forecasted fixed income returns, the Caisse plans to further expand its global portfolio.

For the first time in its history, a majority of its investment exposure is located outside Canada, rising to 54 per cent from 41 per cent in 2011.

The United States was the biggest foreign market, accounting for 26.6 per cent of the Caisse's $75.6 billion overall global investment. Some 40 per cent of its $55-billion real-estate portfolio is now across the border.

Assets in Quebec totalled $59.7 billion, a slight dip from 2014 because of the sale of its investment in Valeant Pharmaceuticals.



Advertisements

Latest Economic News

  • Nortel Canada to start paying billions to creditors

    Economic CBC News
    Nortel Canada's long-suffering creditors will finally begin to receive their share of more than US$4 billion to be distributed under a plan approved in January, eight years after the former technology titan began bankruptcy proceedings. Nortel Networks Corp. Source
  • Nortel Canada to start paying billions to creditors; first instalment by July

    Economic CTV News
    TORONTO - Nortel Canada's long-suffering creditors will finally begin to receive their share of more than US$4 billion to be distributed under a plan approved in January, eight years after the former technology titan began bankruptcy proceedings. Source
  • Que. construction strike: Day 3 kicks off with little to show at bargaining table

    Economic CTV News
    MONTREAL -- There is little progress to report at the table as Quebec's construction strike enters Day 3. Eric Cote, a spokesman for one association of employers, says negotiations resumed late Thursday and that representatives for his group emerged early today suggesting they were a waste of time. Source
  • Ford's ex-CEO leaves company with $51.1M US

    Economic CBC News
    Ford's former CEO Mark Fields is leaving the company with an estimated $51.1 million US in cash, stock awards and pension benefits. Fields, 56, retired earlier this week after three years as CEO. Ford made record profits during his tenure but its stock price dropped nearly 40 per cent on investors' concerns about the company's future. Source
  • Ford's ex-CEO leaves company with US$51.1 million

    Economic CTV News
    DETROIT -- Ford's former CEO Mark Fields is leaving the company with an estimated US$51.1 million in cash, stock awards and pension benefits. Fields, 56, retired earlier this week after three years as CEO. Source
  • Rising program expenses propel fed 2016-17 deficit to $21.8B: preliminary estimate

    Economic CBC News
    A preliminary analysis of the federal books suggests the government ran a 2016-17 deficit of $21.8 billion to put the Liberals close to their projection for the fiscal year. The Trudeau government's spring budget projected a shortfall of $23 billion for the fiscal year, without counting a $3-billion risk adjustment added to the accounting framework. Source
  • Feds run $21.8B deficit in 16-17, putting them close to target: early analysis

    Economic CBC News
    A preliminary analysis of the federal books suggests the government ran a 2016-17 deficit of $21.8 billion to put the Liberals close to their projection for the fiscal year. The Trudeau government's spring budget projected a shortfall of $23 billion for the fiscal year, without counting a $3-billion risk adjustment added to the accounting framework. Source
  • U.S. GDP reading for start of year revised upward, but still weak

    Economic CBC News
    The U.S. economy started 2017 out with a whimper, but it wasn't quite as weak as first thought. The government revised up its January-March growth reading to a rate of 1.2 per cent — better than an earlier estimate of 0.7 per cent but well below President Donald Trump's ambitious growth targets. Source
  • BlackBerry expecting US$940 million in Qualcomm dispute resolution

    Economic CTV News
    WATERLOO, Ont. -- BlackBerry Ltd. (TSX:BB) says it will receive US$940 million from Qualcomm by May 31 to settle a dispute over royalty payments. An arbitrator sided with BlackBerry in April, and announced an interim award of US$814.9 million plus additional amounts for interest and legal fees. Source
  • World shares weaken ahead of G7 meeting; oil bottoms out

    Economic CTV News
    HONG KONG -- World stock markets weakened Friday as investors awaited the upcoming G-7 summit and oil prices rebounded somewhat as markets shook off initial disappointment over a production cut deal. KEEPING SCORE: European shares opened lower, with France's CAC 40 down 0.8 per cent to 5,297.13 and Germany's DAX lost 0.5 per cent to 12,561.85. Source