DBRS Confirms La Caisse de dépôt et placement du Québec at AAA and CDP Financial Inc. at AAA and R-1 (high)

DBRS Limited (DBRS) has today confirmed the Issuer Rating of La Caisse de dépôt et placement du Québec (La Caisse or CDPQ) at AAA, CDP Financial Inc.’s Long-Term Debt rating at AAA, and CDP Financial Inc.’s Canadian Short-Term Promissory Notes, U.S. Commercial Paper Notes and Euro Commercial Paper Notes ratings at R-1 (high). All trends remain Stable. The ratings are supported by a legislative framework that results in a substantial and captive asset base, a low recourse debt burden, ample liquidity and strong operating performance.

La Caisse achieved a total return of 7.6% in 2016, outperforming its benchmark (BM) by 180 basis points. Most asset classes achieved strong absolute returns, though the overall result was driven by particularly strong returns in the Canadian equity, private equity, real estate and infrastructure portfolios. On a relative basis, all asset classes generally remained in line with or outperformed their BMs. With the strong investment result and net contributions of $4.3 billion, net assets rose by $22.7 billion to $270.7 billion.

La Caisse’s investment approach has remained largely unchanged in recent years. The key pillars of the strategy continue to be benchmark-agnostic management, a bias toward quality assets, developing investment partnerships and increasing global diversification. At the same time, management continues to enhance its risk management and depositor relationship management functions. La Caisse’s credit profile continues to benefit from a diverse and captive group of depositors, which has continued to grow in recent years. In 2016, the board reviewed and approved the 2017-2020 strategic priorities of each investment group, which are in line with the previous plan. With respect to La Caisse’s senior management team, it has remained relatively stable in recent years, and in early 2017, the board renewed the Chief Executive Officer’s (CEO) mandate for another four years until March 2021. In April 2017 however, the Chief Investment Officer (CIO) announced his decision to leave La Caisse to enter public and political life. La Caisse is currently in the process of hiring a new CIO, with the CEO taking on the CIO responsibilities in the interim.

Debt with recourse to La Caisse rose modestly to $14.4 billion in 2016, or 5.0% of adjusted net assets, from modest growth in commercial paper (CP) outstanding. At present, La Caisse has no immediate plans to issue term debt or substantially increase its commercial paper outstanding. As such, the recourse debt burden is expected to remain well below 10% of adjusted net assets for the foreseeable future, which is consistent with the AAA rating. La Caisse meets the DBRS criteria for CP liquidity support, as outlined in the appendix to the “Rating Canadian Public Pension Funds & Related Exclusive Asset Managers” methodology entitled “Self-Liquidity for Canadian Public Pension Funds and Related Exclusive Asset Managers’ Commercial Paper Programs” (published in May 2017). La Caisse’s liquidity position remains sound, with sufficient same-day available funds equal to at least five business days of upcoming liabilities and discounted assets equal to the remaining maximum authorized CP program limit, which is consistent with DBRS’s policy on backup liquidity support for pension plans and provides considerable short-term financial flexibility.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodologies are Rating Canadian Public Pension Funds & Related Exclusive Asset Managers and Structured Finance Flow-Through Ratings, which can be found on dbrs.com under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.
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