Those who cannot remember the past are condemned to repeat it. And those who don’t even bother to try should get a kick in the keister.
That’s why we sympathize with those calling for an inquiry into the Caisse de dépôt et placement du Québec’s staggering $39.8-billion loss on its investments last year. It was the worst performance in the 44-year history of Canada’s largest pension fund. Net asset values dropped to $120.1 billion from $155.4 million. Predictably and justifiably, the ruling Liberals called for a two-day hearing into the mess. But a funny thing happened on the way to the committee hearings: Finance Minister Monique Jérôme-Forget cancelled them.
Perhaps it’s not so funny. Quebecers have a right to know what is happening to their retirement funds, and they’re not getting answers.
Some losses at the Caisse could not have been unexpected, given that the economic downturn is wreaking havoc with pension plans across the country. But the magnitude of the Caisse’s misfortune suggests something more might be going on. The Caisse lost 25% of its value last year; OMERS lost 15.3%, and the CPP Fund lost 13.7% for the nine months ending Dec. 31, 2008.
The official line in Quebec is that $22.4 billion can be chalked up to paper losses, investments that could pan out when the markets recover, while hedging foreign real estate and equity holdings cost $8.9 billion. The rest was from losses realized on selling investments. But the opposition isn’t convinced that’s the whole truth. It suspects the fund’s problems are a result of rule changes in 2005 that encouraged managers to take greater risks, such as taking a heavy stake in asset-backed commercial paper (pretty much worthless at this stage). There are also questions about how much the Liberals knew about the losses before the Dec. 8 provincial election.
Maybe it was just bad luck that the Caisse lost so much more money than its peers did. But investors rightly expect transparency from the companies they put their money into; we should demand it from government and their agencies, too. A two-day hearing is a small price to pay.