Credit, Private Equity, Real Estate & Infrastructure Fuel PSP’s Growth in 2021-22

By David G. Barry

The Public Sector Pension Investment Board, one of Canada’s largest pension managers, saw net assets under management grow by nearly CA$26 billion (US$20.5 billion) during the fiscal year ended March 31 – with a quarter coming from its credit portfolio.

PSP Investments ended the year with CA$230.5 billion in net assets (US$181.7 billion) and a 10.9% one-year net portfolio return. Net contributions represented CA$3.5 billion while CA$22.5 billion was generated by net income. Over the past 10 years, the Ottawa-based plan has a net annual return of 9.8% and CA$25.9 billion in cumulative net investment gains.

Credit, surprisingly, was the biggest contributor to those gains as it rose by CA$7.4 billion to CA$21.9 billion. PSP said the gains were spurred by the record levels of acquisition activity by private equity firms that led to “significant opportunities” for credit investments across the debt capital spectrum. During the year, the segment was up 7.5%.

Capital markets, which includes public market equities and fixed income, accounts for 43.4% of PSP’s portfolio. It generated 3% in 2021-2022. Private equity and real estate were the best-performing sectors, generating 27.6% and 24.8%, respectively. Private equity accounts for 15.3% of the portfolio while real estate counts for 13.5%. Private equity’s net AUM role by CA$3.7 billion while real estate increased by CA$4.3 billion.

Infrastructure also performed well, as its net AUM rose by CA$5.1 billion from the end of fiscal year 2020-21 and produced a 13.9% return.

Neil Cunningham, PSP’s president and CEO, said the fund “delivered solid, above-benchmark performance.” Cunningham has announced he will retire from PSP at the end of the current fiscal year in March 2023.

Established in 1999, PSP manages and invests amounts transferred to it by the Government of Canada for the pension plans of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. It has offices in Montreal, New York, London and Hong Kong.