Quebec pension fund loses $39.8 billion

High-risk investments and global economic crisis behind 25-per-cent drop

The Quebec government has launched an investigation into how the province's pension fund manager lost $39.8 billion in 2008.

The Caisse de dépôt et placement du Québec, the arm's length agency that manages investments for various public and private pension plans in Quebec, blames falling stock  prices and the quick depreciation of the Canadian dollar for its record losses.

The Caisse, created in 1965 to manage the province's growing public pension plan, saw investments decline 25 per cent in 2008, with the value of assets falling from $155.4 billion to $120.1 billion.

One reason for the drop was the fund's aggressive pursuit of novel and high-risk financial instruments, such as buying $12.6 billion of asset-backed commercial paper.

Caisse interim chief executive Fernard Perreault said the fund would better manage risk in the future and has changed its asset portfolio to reduce exposure to equities.

But most of the blame for the losses rests with the global economic crisis that has wreaked havoc with markets around the world since last October, said Perreault.

The provincial government will hold legislative hearings to examine the Caisse's poor performance.

The Ontario Municipal Employees Retirement System (OMERS) reported an $8-billion loss in 2008, a negative 15.3 per cent rate of return. The median return for large Canadian pension funds last year was a drop of 18.4 per cent, according to Reuters.

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