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Caisse hopes to profit from Buffett’s interest in Suncor

The Caisse de dépôt et placement du Québec in Montreal on July 21, 2010.

Christinne Muschi/The Globe and Mail

Quebec's main pension fund manager hopes Warren Buffett's investment in Suncor Energy Inc. signals a bigger interest in Canada by the renowned U.S. investor, something that could boost the share value of the companies in which it has invested.

"I hope that it triples the price. … I hope that it quadruples the price," Caisse de dépôt et placement du Québec CEO Michael Sabia said Friday.

He was commenting on news that Mr. Buffett's Berkshire Hathaway Holdings held 17.8 million shares of the Western oil producer as of June 30, valued at more than $500-million. At the same time, the Caisse owned 23.4 million shares worth $689.2-million, according to a U.S. regulatory filing.

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He said he hopes Mr. Buffett "invests in a whole bunch of other things that we're invested in and we just blow the lights out from a returns point of view."

Mr. Sabia made the comments in a conference call after the Caisse released its results for the first half of 2013. He also said the Caisse would consider partnering to take BlackBerry Ltd. private if conditions were right and continues to have faith in the ability of troubled companies SNC-Lavalin Group Inc. and Rona Inc. to turn things around over the long term.

Canada's second-largest institutional investor earned a return of 4.5 per cent on its portfolio in the first six months of 2013, which it said exceeded it reference portfolio, which grew 4.2 per cent. Net assets increased to $185.9-billion at the end of June, up from $176.2-billion at the end of 2012. "We've got work ahead of us, but we think we're continuing to make pretty good progress and we're going to continue to try to do so," he said of the results.The Caisse's performance for the first six months of the year compared with a gain of 3.5 per cent in the same period a year ago and 3.7 per cent in the first half of 2011. Over four years, the Caisse reported an average annual return of 10.5 per cent, compared with 9.1 per cent for its benchmark index.

The $7.8-billion increase in net investments was led by a $6.3-billion (7.7 per cent) increase in equities, a $1.7-billion gain (6.5 per cent) in inflation-sensitive investments and a $600-million (0.9 per cent) decrease in fixed income. The Caisse said rising interest rates hurt the fixed income portfolios, but the asset class outperformed its benchmark index, which decreased by 1.6 per cent.

Mr. Sabia said the global economy is showing signs of returning to greater "normalcy" as the United States enters a more solid growth phase and the Chinese economy slows to a more sustainable long-term pace.

However, he said monetary policy that has kept interest rates at historic lows has prompted equity prices to rise as investors seek alternative investments.

A slowdown in the Chinese economy over the last 12 to 16 months has had a "meaningful impact" on Canadian markets, which declined in the first half of the year, Sabia noted.

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Some markets, particularly in Japan and the U.S. grew sharply, while others were down, creating a wide disparity around the world.

"For us that means we really need to put a premium on being highly selective, very targeted in what we do. That's what we have been doing and that's guided everything that we've done in the first half of the year."

Sabia said the Caisse's new investment strategy, which included the launch of the Global Quality Equity portfolio, with assets of nearly $9.5-billion, has had a positive impact on the six-month results, but the exact benefit won't be fully known for several years.

"It's pretty early to declare victory on that after just six months. ... It is going well but it's too early."

The Caisse also added $1.5-billion of new investments in Quebec and acquired several real estate buildings, including AIMCo's 50 per cent stake in Montreal's Place Ville Marie for $400-million.

It manages investments primarily for public and private pension and insurance plans in Quebec.

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