Is the Caisse de depot taking too many risks

Is the Caisse de depot taking too many risks?

The Caisse de depot et placement du Québec is fortunate to have a fortune of over $400 billion.

That way, year after year, it can absorb the heavy losses it incurs on certain bad investments, while continuing to take risks by reinvesting in other potentially promising assets.

Is the Caisse taking too many risks with many of its investments? They will say “no” to me because his “job” as an institutional investor is to take calculated risks like the other major pension funds in the world do.

Do the Caisse experts carry out all the necessary checks before making investments of tens or even hundreds of millions of dollars? People will say yes to me and add that the Caisse has excellent portfolio managers.

However, all major pension funds and all major mutual funds have made bad investments and mistakes.

The Caisse de Depot et Placement is no exception.

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Take the $200 million that Caisse lost in a year on its investment in Celsius Network, which Caisse Senior Vice President and Chief Technology Officer Alexandre Synnett briefly described as follows: “Celsius is the world leading cryptocurrency lender and has a strong management team that places transparency and customer protection at the core of its business. »

reality ? In a 700-page document, the New York State Attorney responsible for solving Celsius’ bankruptcy proceedings painted a very different picture of the company.

In particular, she criticized the lack of rigor of the company’s accounting, the implementation of a business model believed to be similar to a Ponzi scheme and the lack of responsible corporate governance.

There are also fraud charges against Alex Mashinsky, founder and former CEO of the cryptocurrency lending company.

Azure Power

Another highly questionable major investment that caused the Caisse heavy losses after investing around $600 million in it: Azure Power Global Limited, which the Caisse describes as “an independent solar power leader in India”.

La Caisse loved Azure so much that it became its controlling shareholder with 53.4% ​​of the shares outstanding.

The Caisse’s investment in Azure is now worth less than a third of its investment, while the stock has fallen dramatically on allegations of irregularities within the company and the surprise departure of its President and CEO.

What worries me in this case is to see that the Caisse has invested up to $600 million in a company whose 2022 sales were just $246 million! And whose debt reaches $1.28 billion.

  • Listen to Michel Girard’s business news daily at 7:35 a.m. live. To QUB radio :

Cirque du soleil

Another controversial and, more importantly, difficult to justify investment: the purchase of $100 million worth of Cirque du Soleil stock held by Guy Laliberté just before Cirque du Soleil ceased operations following the outbreak of the COVID pandemic.

Cirque had to file for bankruptcy protection. The Caisse lost that $100 million, time to do an unfortunate pirouette!

McInnis cement

After swallowing nearly half a billion dollars into Gaspé’s costly Ciment McInnis cement works venture, the Caisse managed to cede control to Brazilian multinational Votorantim.

In return for selling this lame duck, the Caisse received 17% of the Canadian joint venture in which Votorantim holds its other Canadian assets, the St Marys Cement cement plant.

It’s a kind of consolation prize for the Caisse.

In the words of the great head of the Caisse de depot et placement, Charles Emond: “Rather than having a large stake in an asset that is losing money, we have there 17% of a joint venture that has four or five extremely profitable. »

Indian trains

What about the fund’s former CEO Michael Sabia’s lack of judgment when he decided to buy Indian trains for the Metropolitan Express Network (REM) instead of acquiring the trains that were made by people here, like this at La Pocatière with the Bombardier plant.

Running trains made in India on the REM that we fund with our taxes and our savings, that’s what we call a Christmas tree!

Bad governance

The Otéra Capital saga, no, but what a tale of bad governance.

Following the internal investigation that the Caisse conducted at its subsidiary Otéra Capital after learning of the disturbing facts unearthed by the Bureau of Investigation of the Journal, four Otéra executives have been fired on allegations of a conflict of interest were.

Ethics, governance and risk management practices at Otéra left much to be desired. Several conflicts of interest have been identified in the commercial loans granted by Otéra.

Losses in 2022?

The Caisse will shortly announce the results of its “performance” for 2022. With the financial markets slumping, both stock and bond, I’m curious to see how their losses will compare through 2021.

However, as the Caisse invests more and more in private placements, it may well be that these mitigate stock market losses.

During bear markets, private placements generally “perform” much better than the stock market as a whole.

Who is Gaston Miron