Wednesday, April 22, 2009

Quebec’s “bas de laine”

The 2008 results of the Caisse de depot et de Placement du Québec have been the worst in its whole history. Contrary to the general upheaval that has taken place in the public opinion, it remains important to take one step back to get a broader sense of the role of the Caisse and the utmost important role it has been playing in the economic landscape of the province to create more wealth for its inhabitants.

First, it is important to clarify that the Caisse one of about 25 sovereign wealth funds in all the countries on earth, meaning it is an entity that put public money to work for the good of the nation’s population. Measure its size by assets, the Caisse de depot et Placements du Québec, comes 6th, even after accounting for the catastrophic results of 2008.

Assets under management amount for a staggering 220,5 billion dollars as of December 31st, 2008. That represents about 28000$ Canadian Dollars for each resident of the province. In Canada, only Alberta has a fund of similar purpose, but it is still a lot smaller and younger. If you count the Alaska Permanent Fund, it becomes pretty clear that there are only three funds of that type in North America.

Looking a little further into the future, Quebec has to be on a smart path to create collective wealth, if we think of the magnitude of the Abu Dhabi Investment Authority. That entity of gigantic proportions manages assets of about 875 billion US dollars... yes billions with a B. Dividing by the number of residents of that kingdom, you get a collective wealth of about 2 million US dollars per person!

That funds managed by the Caisse do not come from a source as lucrative as oil, but with the deposits made to it by numerous provincial pension funds, the Caisse will be a very valuable instrument for the creation of wealth in Quebec. It was a bold proposition from, then Prime Minister Jean Lesage, but it seems that very few people appreciate it and are fast to get angry when things get sour...

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