On Wednesday, Canada’s Public Sector Pension Investment Board (PSP Investments), one of the country’s largest pension funds, released results for its most recent fiscal year, a period that ended March 31, 2021, delivering an 18.4 percent one-year net portfolio return, marking its best performance in ten years. During the period, PSP Investments’ net pension assets under management grew to $204.5 billion, breaking above $200 billion for the first time: an increase in AUM of more than 20 percent ($34.7 billion) year-over-year.
PSP Investments’ approach conforms to a mandate set by the Government of Canada, without exceeding its tolerance for funding risk, and aims to achieve returns in excess of its Reference Portfolio over 10-year periods (net of expenses) and exceeding its Total Fund Benchmark over 10- and five-year periods, reflecting the value added by its active asset management and allocation decisions.
“This investment performance demonstrates the strength of our portfolio and the inspired strategic actions taken to protect and enhance the long-term value of our holdings, and to create high-quality, long-term returns for our contributors and beneficiaries,” PSP Investments President and CEO Neil Cunningham said in announcing the results. “One of the long-term trends that has accelerated during the pandemic is the investor focus on ESG, including climate change. ESG risks and opportunities have long been integrated into our decision-making process for every active investment.”
PSP Investments outperformed its Reference Portfolio across multiple strategies in listed and private markets. PSP’s Capital Markets portfolio, which includes public equities and bonds, delivered a return of 26.6 percent during the year, compared to 23 percent for the benchmark, largely due to internet and external hedge fund outperformance driven by mergers & acquisitions, initial public offerings and event-driven investment situations.
But alternative asset classes also did well for the firm. Its Real Estate strategy delivered a 3.8 percent return for the year, but this measured up against a loss of 6 percent for its benchmark, and was driven by a number of marquee investments during the year, including a joint U.S. residential single-family rental portfolio with Pretium, multiple acquisitions in its U.S. life science partnership with Longfellow, the development of a second fully leased building to Amazon in the Boston Seaport district with WS Development and a large life science portfolio in leading U.S. and U.K. innovation markets through a Blackstone Fund.
PSP Investments also solidly outperformed in the Natural Resources sub-category, delivering a 10.6 percent return for the period, compared to 7.7 percent for its benchmark, as it added more than 200,000 hectares of land to its institutional portfolio, amounting to a global footprint of over 1.6 million hectares of farmland and close 1 million hectares of timberland. During the year, PSP Investments made its first timberland investment in Latin America with the acquisition of a major Chilean forestry asset, invested in U.S. wine grape vineyards, and bought a stake in one of the world’s largest olive producers in the Iberian Peninsula.
PSP Investments manages and invests amounts transferred to it by the Government of Canada for the pension plans of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force.
