Almost no major Canadian pension manager has been spared.
The largest fund, Canada Pension Plan Investment Board, lost 5% on its property portfolio in its last fiscal year as the commercial real estate slump deepened. For the Public Sector Pension Investment Board, the pain amounted to a staggering 16% loss on those bets, the worst fiscal year performance for those investments since the global financial crisis.
With the property market upended by higher borrowing costs, Canadian pensions — known for their massive real estate businesses that were the envy of the investing world for years — are feeling the sting. And it’s leading at least four major funds to now drastically retool their operations.
“What’s worked famously well for the last 35 years may not work so well for the next five to 10,” Jo Taylor, chief executive officer of the C$248 billion ($181 billion) Ontario Teachers’ Pension Plan, said in an interview at Bloomberg’s Toronto office.
Taylor’s fund is grappling with the worst four-year run at its real estate operation since it was transformed by the acquisition of a business called Cadillac Fairview in 2000. That company came to be one of the fund’s crown jewels and the single biggest in its portfolio. But last year, Taylor took authority for most future real estate investments away from Cadillac Fairview and brought them in-house, just like the plan’s other asset classes.
The second-largest Canadian plan, Caisse de Depot et Placement du Quebec, lost 6.2% on real estate bets in fiscal 2023, the worst since the pandemic hit three years earlier. In January, the fund said it would combine that real estate business with another specializing in lending against properties, a merger that’s expected to save the plan C$100 million annually.
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