On the heels of a 9.4-per-cent return last year, Caisse de dépôt et placement du Québec chief executive Charles Emond is now bracing for what could be his biggest test yet – helping the province’s businesses stay competitive in the face of a hostile and unpredictable U.S. government.
The Montreal-based pension-fund giant generated returns worth $40-billion in 2024, boosting its net assets under management to $473-billion, it said in results released Wednesday morning. Equities drove the performance, with a gain of 25.5 per cent as stock market indexes surged on the strength of U.S. technology companies.
Since Donald Trump has taken over the White House, however, volatility has climbed, Mr. Emond said. It’s difficult to predict the President’s actions, which will have an effect not only on trade but also on the decisions of central bankers and corporate leaders, he said.
“We’re seeing uncertainty take up more space on a macroeconomic level,” Mr. Emond told reporters, adding that this makes it more important than ever for the pension fund to stay disciplined and diversified. “Maybe his intention is to create chaos overseas to better negotiate. But right now, he’s also creating chaos at home.”
The Caisse’s private-equity investments rebounded from the previous year, returning 17.2 per cent while the infrastructure portfolio delivered a 9.5-per-cent gain, supported by the strong performance of port and energy assets and high yield. Problems persisted in real estate, particularly in office building assets, which generated a 10.8-per-cent loss while fixed-income assets generated a 1.3-per-cent gain.
The mixed returns highlight the magnitude of the challenges for Mr. Emond, a former Bank of Nova Scotia executive who took over as Caisse CEO in early 2020. His mandate, which was recently extended to 2029, has been fraught with headwinds stemming from the COVID-19 pandemic, record inflation, and wars in Ukraine and the Middle East.
The election of Mr. Trump is shaping up to be the most complicated crisis yet – an existential problem for Canada and Quebec as their leaders struggle to make sense of a historic ally now turned antagonist. Mr. Trump is vowing to slap tariffs of 25 per cent on Canadian imports and 10 per cent on its energy, in addition to separate levies on steel and aluminum.
He has also said he wants to annex this country outright. The comments have sparked a wave of patriotic nationalism in Canada, including in Quebec.
The Caisse operates under a dual government mandate to generate returns and contribute to Quebec’s economic development. That means it will be a key pillar as Quebec puts up defences against the Trump onslaught and tries to create the conditions where its businesses can stay alive and thrive.
Mr. Emond isn’t waiting to act.
The pension fund has boosted its investments in Quebec and now has assets worth $93-billion in the province. Among recent moves, it provided $500-million in support to National Bank to help it buy Canadian Western Bank, helped appease an activist investor at CAE Inc., and convinced trucking firm TFI International Inc. not to redomicile to the United States. This week, it announced a deal to buy clean-energy producer Innergex.
It also rolled out a new flexible financing program to counter the U.S. tariff threat, encouraging Quebec companies to launch projects that increase productivity or to strategically pivot to new markets. There’s no specific budget for the program, but the money is there, and if it becomes as big as the $4-billion liquidity war chest that the Caisse provided to firms in temporary distress during COVID-19, that will not be an issue, Mr. Emond said.
“I’m a big proponent of playing offence with Quebec companies because that’s the best defence,” Mr. Emond said in an interview. “One of my stresses in the current environment is if the Canadian dollar keeps going down, every company in Canada is cheaper for the U.S. or foreign buyers. And that makes life just more complicated.”
Quebec is heavily exposed in any trade fight with the U.S. The province is the world’s biggest aluminum producer, with eight smelters within its boundaries. It is also a major producer of aircraft and aerospace parts as well as trucks.
The Trump tariffs would be the most significant trade shock to hit Canada since the 1930s, Royal Bank of Canada economists said in a forecast earlier this month. A sustained broad-based levy of 25 per cent could “wipe out” Canadian economic growth for up to three years, they said.
Mr. Emond is pragmatic about the Caisse’s U.S. investments, saying it won’t pull back automatically from what remains the world’s most liquid market. He says the reality is that “the whole world is complicated” and that the pension fund has many business partners in the U.S. that will outlast the current government. “We’ve got to keep a long-term view.”
Working through Mr. Trump isn’t the CEO’s only problem.
The Caisse has become entangled in what U.S. authorities have called “an elaborate scheme” to pay hundreds of millions of dollars in bribes in India. Caisse-controlled Azure Power, a renewable-energy developer, is near the centre of the U.S. allegations.
Federal prosecutors in New York unveiled charges this past November against Indian billionaire Gautam Adani and seven other individuals, including three former Caisse executives. They allege that the 62-year-old tycoon and managers from energy subsidiaries of his business conglomerate conspired in a scheme to pay roughly US$250-million in bribes to Indian government officials to help secure favourable contracts.
The Caisse itself has not been accused of any wrongdoing. But observers say the charges raise questions about how aggressively it is pushing into new countries and how deeply it vets the executives it hires to represent it in those countries.
Mr. Emond addressed the Azure issue on Wednesday, characterizing the situation as the result of three rogue employees who lied to their superiors and hid information. “It’s an exceptional case,” he said, adding the organization has a prudent approach to investing in emerging markets.
At home, Mr. Emond’s team is also dealing with a public backlash related to service disruptions of the Caisse’s Réseau express métropolitain (REM) light-rail line, which it financed and built under a new transit development model together with partners Alstom and AtkinsRéalis. The first section of the network is open but has been marred in recent weeks by service stoppages.
Quebec’s Transport Minister summoned Caisse executives to an emergency meeting Feb. 18 to explain the problems and outline proposed solutions. As the meeting was under way, REM service broke down again.
“It’s been unacceptable from our standards,” Mr. Emond said, adding the Caisse and system operators will fix the situation. “The full priority right now is to make sure this service works in the way it should.”