Return highlights for the fiscal year ending March 31, 2023:
- One-year net annual return of 3.5%, representing $4.6 billion in added value
- Five-year net annualized return of 7.2%, representing $10.5 billion in added value
- 10-year net annualized return of 8.5%, representing $16.3 billion in added value
- 20-year net annualized return of 8.4%, representing $19.5 billion in added value
British Columbia Investment Management Corporation (BCI) announced today an annual combined pension plan return of 3.5 per cent, net of all fees, for the fiscal year ended March 31, 2023, against a benchmark of 0.3 per cent. Gross assets under management increased to $233.0 billion, from $228.6 billion in fiscal 2022, excluding ($18.0 billion) in investment liabilities managed by BCI’s funding program[1]. BCI increased net assets under management by $3.9 billion to $215.0 billion, which reflects net investment gains of $6.7 billion and client net withdrawals of $2.8 billion.
“During an unprecedented year, we are proud to have protected capital and added value for our 32 British Columbia public sector clients,” said Gordon J. Fyfe, BCI’s Chief Executive Officer and Chief Investment Officer. “We have been preparing for a difficult market economic environment and our results are a testament to the merits of our proactive approach to risk management, portfolio diversification, and active investing.”
BCI delivered a strong year of relative performance despite prolonged market volatility, inflationary pressures, and record-high interest rates not seen in decades. Fiscal 2023 is the second consecutive year where a new high watermark for outperformance was established with 3.2[2] per cent excess return above the benchmark, representing $4.6 billion in value add. In fiscal 2022, 2.8[2] per cent in outperformance above the benchmark resulted in a value add of $4.4 billion. This reflects the strength and resiliency of the portfolios across asset classes and BCI’s focus on owning quality companies and mitigating downside risk during this challenging market environment. Private equity and infrastructure & renewable resources contributed significant gains, demonstrating the effectiveness of BCI’s greater emphasis on the private markets and inflation-sensitive assets.
“BCI’s portfolio of diversified public and private market investments, most of which are actively managed in-house, allows a flexibility and responsiveness to changing market conditions that helped us deliver strong performance despite the ongoing market turmoil,” added Fyfe. “In a rising rate and volatile market environment like this, active management is especially important. Each basis point we generate for our clients above the market return is key to their long-term success.”
ASSET CLASS HIGHLIGHTS
PUBLIC MARKETS
Public markets, composed of fixed income, private debt, public equity, and absolute return strategy investments, represent $138.0 billion and account for 64.2 per cent of net assets under management, compared with $142.3 billion at the end of fiscal 2022. Additionally, our public markets team manages BCI’s funding program[1] representing ($18.0 billion), or (8.4) per cent of net assets under management.
Public Equities
- Outperformed due to our focus on investing in high-quality companies especially as equity markets dampened while central banks tried to rein in inflation
- Continued to invest in diversifying and value-add strategies for clients with $960 million in deployments in the Global Emerging Markets Fund and $1.9 billion gross deployments in the Global Partnership Fund (GPF)
- The GPF provides clients exposure to absolute return investment strategies and of the 41 months since BCI’s first absolute return investment,16 were negative for global equities, with the index returning a negative cumulative return of (44.6) per cent during those months. In contrast, our absolute return investments delivered 20.5 per cent cumulative returns during those months and only delivered negative performance during three of the 16 months. BCI’s absolute return strategies have grown to over $5 billion net asset value with total investments in over 30 funds and more than 23 co-investments
Fixed Income
- Outperformed due to disciplined credit selection and BCI’s ability to take on larger loan allocations
- Established a reputation as a leading institutional provider of capital to the direct lending market. In less than five years, BCI has grown the private debt portfolio to $13.5 billion as at the end of the fiscal year
- On a one-year period, the Principal Credit Fund generated positive returns of 4.6 per cent and outperformed the benchmark by 2.5 per cent
- Invested in 22 sustainable bond issuances valued at over $1.1 billion, increasing total historical participation to $4.2 billion; we expect this number to grow to $5 billion by 2025
PRIVATE EQUITY
Private equity represents $28.3 billion and 13.1 per cent of net assets under management, compared with $24.8 billion at the end of fiscal 2022.
- Committed a record $9.8 billion in overall capital with $3.7 billion allocated to 14 direct investments including capital commitments to existing investments
- Created $15.4 billion of value over the last five years and returned $20.5 billion in cash distributions to clients
- Invested in Authority Brands, a residential home services platform in North America, Maxar Technologies, a provider of comprehensive space solutions and secure, precise, geospatial intelligence, and ZEDRA, a global specialist in active wealth, corporate and global expansion, funds as well as in pensions and incentives solutions. Maxar Technologies and ZEDRA closed in early fiscal 2024
INFRASTRUCTURE & RENEWABLE RESOURCES
Our infrastructure & renewable resources (I&RR) program represents $22.3 billion and 10.4 per cent of net assets under management, compared with $20.2 billion at the end of fiscal 2022.
- Outperformed due to our regulated utility assets exposure, which has been resilient to rising interest rates, and strong capital appreciation. Deal activity was robust in the I&RR space which generated a material valuation uplift for some of our assets
- Committed $4.0 billion in new opportunities including co-investments in two energy transition assets, Reden Solar, BCI’s first direct investment in solar energy, and Eku Energy, the first direct investment in battery storage. The investments demonstrate BCI’s commitment to actively invest in key areas we believe will benefit from the energy transition as outlined in our 2022 Climate Action Plan
REAL ESTATE EQUITY
Our real estate equity program represents $36.1 billion and 16.8 per cent of net assets under management, compared with $33.6 billion at the end of fiscal 2022. These assets are actively managed by QuadReal Property Group (QuadReal), an independently operated company owned by BCI.
- Outperformed due to an overweight sector allocation to industrial, residential, and alternative assets, with geographic diversification, including now managing industrial real estate assets in the United States, thereby protecting the portfolio from market volatility
- Overall, net deployment was $3.5 billion, which was slightly higher than expected, while strategic disposition activity was focused on enhancing the resiliency of the portfolio. Significantly, distributions were executed in every region in which QuadReal is operating today
- Added value by securing longer-term leases with commercial tenants and generated strong rental growth in industrial properties with higher market rent lease-ups, allowing the portfolio to benefit from high occupancy levels and stable revenue
REAL ESTATE DEBT
Also managed by QuadReal, our real estate debt program represents $7.9 billion or 3.7 per cent of net assets under management, compared to $7.8 billion at the end of fiscal 2022.
- Outperformed due to the floating rate loans, which make up about 80 per cent of the portfolio, as these loans adjust to the higher interest rates
- Deployed $1.1 billion in real estate debt, in line with expectations. As banks face increasing capital constraints and property valuations become uncertain, non-bank lenders like QuadReal are well-positioned to benefit from opportunities to fill out the capital structure through subordinate debt and similar financing structures
BCI’s corporate annual report outlining other investment and operational highlights will be released on July 12, 2023, and will be available online at BCI.ca/reports. All figures are in Canadian dollars.
ABOUT BCI
British Columbia Investment Management Corporation (BCI) is amongst the largest institutional investors in Canada with C$233.0 billion in gross assets under management, as of March 31, 2023. Based in Victoria, British Columbia, with offices in Vancouver, New York City, and London, U.K., BCI manages a portfolio of diversified public and private market investments on behalf of our 32 British Columbia public sector clients.
With a global outlook, BCI integrates ESG factors into investment decisions and activities that convert savings into productive capital to meet clients’ risk and return requirements over time. Founded in 1999, BCI is a statutory corporation created by the Public Sector Pension Plans Act. For more information, visit BCI.ca or LinkedIn.
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[1] Includes clients’ investment liabilities achieved through government bond repurchase agreements.
[2] Includes the impact of the clients’ currency hedging policies.
Attachments
- Annualized Combined Pension Plan Returns, Cumulative Value Add and AUM
- Return Summary for the Combined Pension Plan Clients
