PSP Investments posts 4.4% annual net return

Public Sector Pension Investment Board, Montreal, returned a net 4.4% for the fiscal year ended March 31, exceeding the -2.8% net return of its benchmark, according to the annual report released on Wednesday.

For the five- and 10-year periods, PSP Investments delivered annualized net returns of 7.9% and 9.2%, respectively. These figures compare to benchmark returns of 5.5% and 7.4%, respectively.

Net assets under management reached C$243.7 billion ($179.9 billion) as of March 31, up from C$230.5 billion at the end of the prior fiscal year.

By asset class, the top net performers for fiscal 2023 were infrastructure, up 19%; credit investments, up 13.1%; natural resources, up 10.9%; and private equity, up 3.3%.

The worst performers were capital markets (which comprises public market equities and fixed income), up 0.3%; real estate, up 0.2%; and the complementary portfolio, which slipped 0.2%.

According to the annual report, the complementary portfolio “focuses primarily on investments that are not within the mandate of an existing asset class but are beneficial to the total fund.”

As of March 31, the actual allocation for PSP’s portfolio was 40% capital markets; private equity 15%; real estate 13%; infrastructure 12%; credit investments 11%; and natural resources, 5%; and the remainder in the complementary portfolio, cash and cash equivalent.

PSP Investments noted in a release issued in conjunction with the annual report that the performance of public market equities was “impacted by measures taken by central banks to curb persistently high inflation, the escalation of global political tension, and recent shock waves sent through the financial sector caused by the U.S. regional banking crisis.”

Eduard van Gelderen, senior vice president and CIO at PSP Investments, stated in the release: “Our strategy to diversify into private markets and expand internationally has been key to maintaining stability in exceptionally volatile financial markets.

“Our foreign currency exposure is an important component of our portfolio construction approach. This year, it contributed 5.8% to the net return as the euro and British pound rebounded, whilst our open U.S. dollar exposure played its expected role in mitigating the total fund’s downside risk.”