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

DBRS Limited (DBRS) confirmed the Issuer Rating of Caisse de dépôt et placement du Québec (La Caisse or CDPQ) at AAA and CDP Financial Inc.’s Long-Term Debt rating at AAA and Canadian Short-Term Promissory Notes, U.S. Commercial Paper Notes and Euro Commercial Paper Notes ratings at R-1 (high). All trends are 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 9.3% in 2017, in line with its benchmark (BM) of 9.2%. Most asset classes achieved strong absolute returns, though the overall result was driven by particularly strong returns in the equity markets. On a relative basis, all asset classes generally remained in line with their BMs. With the strong investment result and net contributions of $3.2 billion, net assets rose by $27.8 billion to $298.5 billion.

La Caisse’s investment approach has remained largely unchanged in recent years. The key pillars of the strategy continue to be BM-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 2017, the board renewed the Chief Executive Officer’s mandate for another four years until March 2021. In April 2017, however, the Chief Investment Officer announced his decision to leave La Caisse to enter public and political life. In early 2018, La Caisse announced changes to its management team, including appointing from internally a new head of Liquid Markets and a head of the new Investment Strategies and Innovation team, who is also responsible for asset allocation and portfolio construction activities. Additionally, responsibility for all depositor-related activities was moved to under the Chief Risk Officer.

Debt with recourse to La Caisse decreased to $13.8 billion in 2017, or 4.4% of adjusted net assets. The recourse debt burden remains well below 10% of adjusted net assets, providing considerable room for cyclical fluctuations in asset values. La Caisse meets the DBRS criteria for commercial paper (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.” 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.

DBRS notes that a USD 4.0 billion credit facility guaranteed by CDPQ for general corporate purposes was put in place in 2017 as an additional source of liquidity. The credit facility remains undrawn as at December 31, 2017.

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 under Related Documents or by contacting us at info@dbrs.com.

The principal methodologies are Rating 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.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.