Weakness in Real Estate Assets Persists as Canadian Pension Funds Deliver Weak Returns in H1 2024

We provide an overview and outlook for Canada’s Large Pension Funds by highlighting the performance of the four pension funds (CPPIB, CDPQ, OMERS, and OTPP) that reported results for the interim period ended June 30, 2024.

Key Highlights:
-- Real estate assets delivered losses in H1 2024 and FY2023, but overall results were positive for each the four pensions funds that reported interim results ended June 30, 2024.

-- CDPQ, OMERS, and OTPP gained around 4% each while CPPIB, based on the one quarter of results, delivered a 1% portfolio return.

-- Private credit will continue to attract capital, but we may see some shift away from office real estate and private equity given their more limited return prospects.

“Notwithstanding the recent market volatility, we expect 2024 performance to be similar to what was observed in 2023 with positive returns from Large Pension Funds,” said Ranuj Kumar, Vice President, Global Insurance & Pension Ratings. “However, we expect Large Pension Funds to reposition their real estate portfolios while private credit and infrastructure will remain areas of interest as they provide steady income generation and have had historically strong returns.”