The Public Sector Pension Investment Board posted a 6.5 per cent return in fiscal 2026, pushing net assets under management to $320.6 billion, but falling short of the return of its reference portfolio.
The fund, which manages the pension plans of the federal public service, the Canadian Forces and the Royal Canadian Mounted Police, attributed the heavy weighting to equities in its benchmark for the underperformance in a year in which equities soared, but other asset classes struggled.
“On a one-year basis, especially with robust … public equities like we’ve seen, it can be difficult to beat. But we look at it over longer periods,” said Deb Orida, chief executive of PSP Investments, of the benchmark.
“We have outperformed it over three, five, ten (years and) since inception and created a billions of dollars of value relative to that benchmark.”
Public market equities were the top performer in PSP’s portfolio in the year ended March 31, with a 20.6 per cent one-year return.
The worst-performing segment was real estate, with a -7.3 per cent one-year return that dragged down the five-year real estate return to -0.5 per cent.
Orida said Toronto’s residential real estate market , where prices are falling even as sales rise, was a contributing factor due to the pension fund ’s investment in redeveloping the Downsview airport lands in the north end of Canada’s largest city.
“We have a large investment in Downsview, which is a long-term asset, but the multi-use nature of it means that impacts on the Toronto residential real estate market will have impact on the long-term value,” she said. “The impact on Downsview was a very significant mover for us this year, just based on the size of that asset relative to the rest of our portfolio.”
Private equity and credit also under-performed prior years, with returns of 5.3 and 3.1 per cent in fiscal 2026, respectively.
Orida said both were recalibrating from the lofty post-pandemic period of 2021 and 2022 when low rates meant borrowing was cheap and there was an appetite for leverage.
Private credit also took hits in the past year amid concerns about exposure to software companies and the impact of artificial intelligence on those firms, particularly with more participation among retail investors.
“We actually think where we are now is a healthy reset because as retail learns that this is not a liquid asset class, there’s been more discipline in the market,” she said. “So the credits that we’re seeing now are have tighter terms, they’re for better businesses, and we’re not seeing the same rush to deploy capital that we were seeing.”
Orida said PSP Investments, an early player in the asset class with a 10-year track record of double-digit returns in private credit, is well positioned to add to its portfolio, while there is no pressure to do so.
“Although the market has slowed, we’re seeing opportunities to make better investments going forward,” she said.
About 20 per cent of PSP’s gross assets are invested in Canada, up from 19 per cent in fiscal 2025, and Orida said she expects it to climb even higher in the coming years.
“In this last fiscal year, we invested $10 billion in Canada, which was primarily driven by direct private investments as well as an increased allocation to Canadian equities, so that brings us to a total of over $75 billion,” she said, adding that there is interest in purchasing more infrastructure at home that would provide a hedge against inflation, as the increased exposure to Canadian equities does.
Orida said she is encouraged by the federal government’s new willingness to look at potential airport privatization and selling infrastructure such as airports to private investors to fund priority nation-building projects.
“I am encouraged by the government’s openness to asset recycling,” she said, adding that she joined Prime Minister Mark Carney during his March trip to Australia, which has successfully funded new priority government projects such as transportation networks with proceeds from selling mature infrastructure to institutional investors including Canadian pension funds.
“I had the opportunity to go down (to Australia) with the prime minister and the minister of finance and we talked about asset recycling and their track record, and how they used the mechanism, which I thought was great,” Orida said. “I think that asset recycling could create more good opportunities for us to invest in Canada, and we’re very encouraged by what we’re hearing from the government.”
• Email: bshecter@nationalpost.com