Despite a volatile year, the Public Service Plan Investment Board welcomes returns of 4.4 per cent in its 2023 annual report.
The Public Sector Pension Investment Board (PSP Investments) released its 2023 annual report outlining its performance during the 2023 fiscal year (ended March 2023). PSP Investments was founded in 1999 and has managed the amounts transferred to it by the Government of Canada for the funding of the pensions of the federal public service, Royal Canadian Mounted Police, Canadian Armed Forces Regular Force and Canadian Armed Forces Reserve Force.
Fiscal 2023 was challenging. There were increases in interest rates to curb inflation, escalating global political tensions and increased volatility throughout the financial sector as Silicon Valley Bank collapsed. Board chair Martin Glynn wrote that 2023 was a solid year of performance for PSP Investments, despite a difficult market environment. PSP Investments managed to advance key strategic initiatives including moving forward on its climate investing strategy.
The one-year net portfolio return was 4.4 per cent or $10.2 billion net portfolio income. The plan managed net annualized returns over the last five and 10 years of 7.9 per cent and 9.2 per cent respectively while outperforming the reference portfolio and generating $22.3 billion and $31.8 billion of excess net investment gains over the same periods. This increased the total assets under management to $243.7 billion.
Over a third (40.4 per cent) of those assets were invested in capital markets ($98.5 billion), with private equity totaling $37.2B (15 per cent), credit investments reaching $26.1 billion (10.7 per cent), real estate at $32 billion (13.1 per cent), infrastructure climbing to $29.4 billion (12.1 per cent) and finally natural resources at $12.3 billion (5 per cent). PSP Investments is invested in over 100 sectors and industries, from agriculture and energy to residential and transportation. The asset class mix is divided into four main categories: 38.1 per cent equity, 30.2 per cent real assets, 21 per cent government fixed income and 10.7 per cent credit.
The annual report also reemphasized PSP Investments’ commitment to considering environmental, social and governance (ESG) factors in its investments and asset management activities. PSP Investments’ Climate Strategy Roadmap was launched in April 2023, with a plan to reach global net-zero greenhouse gas emissions by 2050. The Sustainable Investment Policy and Corporate Governance and Proxy Voting Principles were also updated to enhance expectations with respect to public disclosure on climate change, as well as to report on associated risks and opportunities.