Canadian pension fund CDPQ posts first negative annual returns since financial crisis

FILE PHOTO: The Caisse de depot et placement du Quebec building is seen in Montreal

(Reuters) - Canada's second-largest pension fund Caisse de dépôt et placement du Québec (CDPQ) on Thursday reported investment losses and a drop in net assets for 2022 as aggressive rate hikes led to turbulence across global markets.

CDPQ's investments were down 5.6% for the year ended Dec. 31, compared with a 13.5% return for full-year 2021.

Central banks across the world raised interest rates last year to tame decades-high inflation, increasing the odds of a recession and hurting returns for investors.

"The year 2022 provided an environment filled with several challenges, with spiking inflation, historic interest rate hikes by central banks and rising geopolitical tensions," Chief Executive Officer Charles Emond said.

Annual net assets plunged C$18 billion ($13.31 billion) year-over-year to C$402 billion, resulting from falling values in fixed income that experienced a sharp downturn due to the fastest monetary tightening seen in decades.

CDPQ also took a hit from the crypto winter due to its failed $150 million investment in crypto firm Celsius, which filed for bankruptcy protection in July.

In August, CDPQ said it was exploring legal options and would no longer invest in crypto companies.

Last month, the Bank of Canada became the first major central bank to say it would hold off on further moves to let the effects of past hikes sink in. The central bank over the past 11 months has lifted interest rates at a record pace to 4.5% to curb inflation.

Earlier this month, Canada Pension Plan Investments Board reported a rise in its net assets in its third fiscal quarter of 2023, helped by gains in private equity, real estate and credit investments.

($1 = 1.3540 Canadian dollars)

(Reporting by Maiya Keidan in Toronto and Jaiveer Shekhawat in Bengaluru; Editing by Sherry Jacob-Phillips)