DBRS Morningstar Confirms Caisse de dépôt et placement du Québec at AAA and CDP Financial Inc. at AAA and R-1 (high)

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating of Caisse de dépôt et placement du Québec (La Caisse or CDPQ) at AAA. DBRS Morningstar also confirmed CDP Financial Inc.’s (CDP Financial) 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 7.7% in 2021, driven by a strong performance in equity portfolios, including public and private equities, as well as a high return from fixed income investments. On a relative basis, the overall portfolio underperformed its benchmark (BM) by 150 basis points (bps), primarily because of the impact of the Coronavirus Disease (COVID-19) on some investments in real estate. Net assets increased by $25.4 billion to $365.5 billion in 2020 as a result of $25.4 billion in net investment results, in addition to $0.6 billion in net contributions by depositors, offset by operating expenses of $0.6 billion. Net returns measured over both a five-year and a 10-year investment horizon have outperformed their BMs by 20 and 40 bps, respectively.

La Caisse’s investment approach has remained largely unchanged in recent years. The key pillars of the strategy are optimizing performance for clients, contributing to the economic development of Québec, increasing global presence, affirming the leadership in stewardship investing, and capitalizing on technology trends. In 2020, La Caisse added another focus to capitalize on technology trends for its investment opportunities and advancement of its operations. 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 that has continued to grow in recent years. In 2020, the board reviewed and confirmed CDPQ's strategic directions and team execution priorities of each investment group, which are in line with the previous plan. In 2020, La Caisse appointed a new president and chief executive officer, the Board approved key changes in the organization structure and created CDPQ Global to raise further its international profile and deploy an integrated approach as it continues to globalize its investments.

Debt with recourse to La Caisse increased to $22.1 billion in 2020, or 5.7% 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 Morningstar criteria for commercial paper (CP) liquidity support, as outlined in the Appendix to the DBRS Morningstar methodology “Rating Canadian Public Pension Funds & Related Exclusive Asset Managers” 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 Morningstar’s policy on backup liquidity support for pension plans and provides considerable short-term financial flexibility.

The USD 4.0 billion credit facility guaranteed by CDPQ for general corporate purposes was renewed in 2020 and remained undrawn as at December 31, 2020.

The rating includes additional analysis on the expected performance as a result of the global efforts to contain the coronavirus pandemic. The DBRS Morningstar Sovereigns group initially published its outlook on the coronavirus’ impact on key economic indicators for the 2020–22 time frame on April 16, 2020. The scenarios were updated on June 18, 2021. For details, see “Global Macroeconomic Scenarios: June 2021 Update” at https://www.dbrsmorningstar.com/document/380281

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodologies are Rating Canadian Public Pension Funds & Related Exclusive Asset Managers (April 30, 2021) and North American Structured Finance Flow-Through Ratings (January 4, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action on these issuers took place on July 3, 2020, when DBRS Morningstar confirmed the outstanding ratings with Stable trends.

For further information on DBRS Morningstar 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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst: Clara Vargas, Senior 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@dbrsmorningstar.com.

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

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-- Rating Canadian Public Pension Funds & Related Exclusive Asset Managers (April 30, 2021)
https://www.dbrsmorningstar.com/research/377851/rating-canadian-public-pension-funds-related-exclusive-asset-managers
-- North American Structured Finance Flow-Through Ratings (January 4, 2021)
https://www.dbrsmorningstar.com/research/371997/north-american-structured-finance-flow-through-ratings