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. DBRS also confirmed CDP Financial Inc.’s Long-Term Debt rating at AAA as well as its 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 4.2% in 2018, outperforming its benchmark (BM) of 2.4%. Most asset classes achieved positive absolute returns, though the overall result was driven by particularly strong returns in private equity and real assets. On a relative basis, all asset classes generally remained in line with or exceeded their BMs. Net assets rose by $11.0 billion to $309.5 billion as a result of net investment income of $11.8 billion, which was offset by a net withdrawal of $0.8 billion by depositors.

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 while contributing to the economic development of Québec. 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 2018, the board reviewed and approved the 2018–2022 strategic priorities of each investment group, which are in line with the previous plan. In 2018, La Caisse announced changes to its management team that included the internal appointment of a new Head of Liquid Markets and a new Head of Investment Strategies and Innovation team as well as new leadership for the Digital Technology and Operations, Public Affairs and Infrastructure teams. Additionally, responsibility for all depositor-related activities was moved under the Chief Risk Officer. In early 2019, La Caisse announced the appointment of two executives to key functions related to their global strategy, including a new Chief Economist and a new Executive Vice-President, who will be responsible for implementing La Caisse’s Québec investment strategy in addition to piloting the global and the strategic planning process for La Caisse’s global activities.

Debt with recourse to La Caisse increased to $15.5 billion in 2018, or 4.8% of adjusted net assets. Despite the slight increase, recourse debt burden remains well below the board-approved limit of 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 DBRS’s “Rating Canadian Public Pension Funds & Related Exclusive Asset Managers” methodology under the heading “Self-Liquidity for Canadian Public Pension Funds and Related Exclusive Asset Managers’ CP 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 was renewed in 2018 and remains undrawn as at December 31, 2018.

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

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 & Criteria.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action on these issuers took place on July 6, 2018, when DBRS confirmed the outstanding ratings with Stable trends.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Lead Analyst: Fanfei Gong, Assistant Vice President
Rating Committee Chair: Tim O'Neil, Managing Director
Initial Rating Date: September 23, 2002

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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