Lisa Kailai Han and Sean Conlon of CNBC report S&P 500 closes higher for a fourth day in a row, notches 4% gain for the week:

The S&P 500 rose on Friday, adding to its strong gains for the week, as investors continue to navigate an evolving global trade landscape while major tech names got a boost.

The broad market benchmark ended 0.74% higher at 5,525.21, while the Nasdaq Composite added 1.26% to end at 17,282.94. The Dow Jones Industrial Average lagged, but managed to close 0.05%, or 20 points higher, at 40,113.50.

Alphabet rose 1.5% after the Google parent and “Magnificent Seven” name reported a beat on the top and the bottom lines for the first quarter. Tesla, meanwhile, popped 9.8%, while fellow megacap names Nvidia and Meta Platforms advanced 4.3% and 2.7%, respectively.

The major averages rose on the week, notching their second positive week out of three. The S&P 500 gained 4.6%, while the Nasdaq climbed 6.7%. The Dow has underperformed but still cinched a one-week advance of 2.5%. With these latest gains, Nasdaq is now slightly positive for the month, but the S&P 500 is down 1.5% month to date. The Dow has fallen 4.5% so far in April.

Stocks have been taken for a wild ride in recent weeks, as traders try to make sense of the severity of President Donald Trump’s tariffs first unveiled on April 2. Mixed messaging around trade has added to the volatility.

China said Thursday that there were no talks with the U.S. on a potential trade deal. This came after the U.S. appeared to soften its stance on trade relations with China.

On Friday, Time magazine published comments from Trump that said he would consider it a “total victory” if the U.S. has high tariffs of 20% to 50% on foreign countries a year from now. But his Tuesday comments published Friday also said the president expects announcements on many deals to be coming “over the next three to four weeks.”

Adding to the confusion, Trump told reporters from Air Force One that he would not drop tariffs on China unless “they give us something.”

Still, going forward, Jay Hatfield, founder and chief investment officer of InfraCap, is optimistic that the worst of the tariff-induced uncertainty is over.

“The confusion about whether there’s really talks going on with China or not took some steam out of the market,” he told CNBC in an interview. “Our view is that we’ve reached peak tariff tantrum and so it’s likely to be more positive than negative.”

Hatfield believes the key driver for markets next week will be earnings from big hyperscaler firms such as Microsoft and Amazon.

Amalya Dubrovsky , Brett LoGiurato and Ines Ferré of Yahoo Finance also report Tesla surges 9%, S&P 500 gains for 4th-straight day in longest win streak since January:

US stocks rose on Friday, led by Big Tech, as President Trump's latest comments on tariffs kept trade tensions in focus.

The Dow Jones Industrial Average rose slightly. But the S&P 500 gained 0.7%, closing out its longest winning run since January. The Nasdaq Composite gained nearly 1.3%.

Tech stocks led a four-day rally on the S&P 500 and Nasdaq. AI chip maker Nvidia (NVDA) rose nearly 4%. EV maker Tesla (TSLA) jumped nearly 10% amid optimism that entry into the Indian market is near, and as the US said it would ease rules around self-driving technology.

The S&P 500 gained more than 4% for the week as investors focused on Trump's generally optimistic tone on trade talks and Fed officials hinted at possible rate cuts as early as this summer.

On Friday afternoon, Trump told reporters he won't drop tariffs on China unless "they give us something" in return. He also said another tariff pause is unlikely.

Meanwhile, reports circulated that China may pause its 125% tariff on some US goods, boosting market sentiment. Trump has claimed progress in negotiations with China, but China denied the existence of negotiations and demanded that the US lift its tariffs.

In individual movers, Alphabet (GOOG, GOOGL) stock rose after the company beat on earnings and announced a dividend hike and a $70 billion stock buyback. Intel's (INTC) stock fell despite beating earnings estimates. T-Mobile (TMUS) and Skechers (SKX) tumbled too, with both companies flagging the early effects of the tariffs.

Next week investors will hear from software giant Microsoft (MSFT) and social media platform Meta (META) as they report earnings on Wednesday. Tech giant Apple (AAPL) and e-commerce platform Amazon (AMZN) will also report earnings on Thursday.

It was a strong week in markets led by mega cap tech shares and other hyper growth stocks:

 Are we past peak tariff tantrum? Most likely but with Trump, you never know.

One thing is for sure, the US economy is a lot more resilient than most analysts think and all this nonsense on the "end of American exceptionalism" and the "death of the US dollar" was way overblown.

In my opinion, the US dollar which has been hammered this year, especially after tariffs were announces, is due for a big bounce up:

As far as the Nasdaq, it bounced big this week but remains below its 10 and 50-week exponential moving average:

It was really semiconductor shares (SMH) which propelled tech stocks higher this week but there too, hard to read more than a bounce for now:

 

There are a lot of bounces from deeply oversold levels but it doesn't mean new uptrend has resumed.

Having said this, if economic data and earnings prove to be better than expected in Q2,  this might be a decent quarter in the market.

I'm more concerned about Q3 and Q4 when delayed effects of tariffs kick in.

Interestingly, Reuters reports a JPMorgan survey shows consensus over weak dollar, US stagflation: 

There is a much higher risk of stagflation than recession in the U.S. economy over the next year, while the asset class most expected to outperform in 2025 is cash, according to the results of a JPMorgan survey published on Friday.

The trade war started by the U.S. administration of Donald Trump is seen by the majority as the policy with the most negative impact on the world's largest economy.

Three in five respondents believe U.S. economic growth will stall and inflation will remain above the 2% Federal Reserve target, with one-in-five respondents expecting inflation above 3.5%.

There is also consensus on the weakness of the U.S. dollar, with a majority expecting the euro at or above $1.11 to end the year, at least an 8% decrease for the U.S. currency this year.

"Our meetings were noteworthy for the differences in views between US investors compared to global investors on the consequences and market implications" of the regime change in the United States, JPMorgan said.

Cash is expected to remain expensive as yields on the U.S. 10-year note are not seen declining much from current levels. Over half of respondents believe the benchmark yield will be at or above 4.25% by the end of 2025.

Almost half of the respondents expect Brent oil prices to stabilize not far from the current price of $66 per barrel, while 3 in 10 foresee prices dropping to or below $60.

At 13%, more investors bet that emerging market equities will outperform other asset classes than the 9% who think developed stocks will.

Fifty-seven percent of respondents expecting Wall Street stocks to be the asset class with the largest outflows this year.

ESG investing was out of favor with 30% committed to maintaining their strategies while 42% showed no interest.

JPMorgan's survey was conducted on April 1-24 and 495 investors responded, according to the bank.

Note when this survey was conducted and the only reason I'm sharing it is because it will likely turn out to be spectacularly wrong.

Lastly, my friend and trading mentor Fred Lecoq who now lives in beautiful France sent me a Wall Street Journal article from Jason Zweig on the mistakes you're making in the stock market -- without even knowing it:

If you’re young, you know stocks and bitcoin can lose money at lightning speed. Just think of March 2020 or 2022. But your experience also tells you they will bounce back even faster and go on to new highs.

If you’re a middle-aged bond investor, you lived through almost nothing but falling interest rates and bountiful returns from 1981 through early 2022. In an earlier generation, the stock-market crash of 1929 haunted many investors, who shunned stocks for decades after.

Peter Bernstein, a financial historian and investment strategist who died in 2009, liked to say that investors have memory banks: the market returns collectively earned by people of similar age. Experience shapes expectations.

The problem is that your memory bank can deceive you in dangerous ways. Your experience of the past is a reasonable guide to the future only if the future turns out to resemble the portion of the past that you’ve lived through. And it often doesn’t.

Given the markets’ wild oscillations amid the uncertainty over President Trump’s trade policy, it’s worth looking at a few investing beliefs that your memory bank might hold—and asking whether they’re still valid.

Growth crushes value

For most of the past decade-and-a-half, value stocks—companies with lower share prices relative to their earnings and assets—have limped along, far behind higher-priced growth stocks like Apple, Nvidia and Tesla.

So far this year, though, Warren Buffett’s Berkshire Hathaway, the standard-bearer for bargain-hunting in the stock market, has gained 17.3%, bolstered by its $330 billion in cash. The technology-laden Nasdaq Composite Index is down 10.9%.

No matter how much the chaos over trade policy upsets the global economy, “the underpinnings of value will still matter,” says Rob Arnott, chairman of investment firm Research Affiliates. 

Value stocks should be less vulnerable to the market turmoil than growth stocks. “History shows that during times of turbulence, value beats growth,” says Arnott.

And for most of the past century, cheaper stocks outperformed more glamorous growth stocks—not the other way around, as your memory bank might suggest. If most of your stock portfolio is in growth, consider adding some value stocks.

The U.S. is the only place to be

For most of the past two decades, international markets ate U.S. dust as the dollar strengthened and American technology companies boomed.

That was then, this is now. In 2025, the MSCI ACWI ex USA Index, which tracks markets outside the U.S., is beating the S&P 500 by more than 14 percentage points.

If you’re a younger investor, your memory bank can’t tell you that international markets excelled for much of the past half century. From 1971 through 1990, the MSCI EAFE index of developed international markets outperformed the S&P 500 by an average of 4.2 percentage points annually, according to T. Rowe Price. For part of that period, overseas investments benefited from the tailwind of a declining dollar, which makes earnings in other currencies more valuable to American investors.

Even after their recent run-up, international stocks are relatively cheap, trading at less than 16 times earnings over the past 12 months and under two times book value, or net worth; U.S. stocks are at roughly 24 times earnings and more than four times book value.

If the dollar continues to weaken, that will strengthen overseas stocks; even if it doesn’t, the U.S. isn’t the only game in town. There’s a whole planet out there.

Buy the dips, and time will bail you out

The 1994 book “Stocks for the Long Run,” by finance professor Jeremy Siegel of the University of Pennsylvania’s Wharton School, argued that there’s rarely been a period of at least 20 years when stocks didn’t beat bonds after inflation.

Recent research by Edward McQuarrie, a business professor emeritus at Santa Clara University, shows that isn’t true. After spending years meticulously correcting the historical record of U.S. asset returns back to 1793, McQuarrie found numerous 20-year periods in which bonds beat stocks after inflation, most recently over the two decades ended in 2012.

None of this means you shouldn’t buy stocks or hold them for the long term. It does mean stocks aren’t guaranteed or foreordained to beat bonds, even over long periods.

Their returns are a function of interest rates, inflation and how expensive stocks are relative to bonds. Right now, stocks are far from cheap. Temper your expectations and focus on saving more, in case stocks don’t earn more.

Cash is trash

Many investors can’t forget the period from 2009 through 2021, when cash often earned less than nothing after inflation. It couldn’t even play defense.

In 2025, however, cash is playing offense. With yields exceeding 4%, Treasury bills and money-market funds are clobbering stocks so far this year. They’re also outpacing the official measure of inflation.

Gold always glitters

If you’ve recently invested in gold, you know it shines during times of crisis. Your memory bank might not include gold’s historically dull performance after rapid peaks in its price. Gold didn’t surpass its January 1980 record closing price of $834 until nearly 28 years later and didn’t rise above its August 2011 closing high of $1,892 for almost nine years after that. Even at its recent price of about $3,300 it has yet to exceed its 1980 closing high after adjusting for inflation, according to Dow Jones Market Data. Gold is gleaming now, but it could tarnish when calm returns.

As you examine your beliefs, be sure to consult the longest-term data available, to capture periods you didn’t experience personally.

Testing the validity of what’s in your memory bank won’t prevent you from being guided by your investment experience. It might help prevent you from being its prisoner.

 Great insights but this time is different, or is it?

At this point it’s not a question if we are in a recession, it’s a question how severe it will be, and how long will it last. pic.twitter.com/OpnzGbUrPo

— Michael A. Arouet (@MichaelAArouet) April 24, 2025

US stocks are barely pricing in an economic slowdown, let alone a recession. pic.twitter.com/98q5K7C6VW

— Peter Berezin (@PeterBerezinBCA) April 25, 2025

Alright, have great weekend everyone.

Below, Atlanta Fed President Dennis Lockhart joins 'Squawk Box' to discuss the state of the economy, impact on the Fed's inflation fight, impact of policy uncertainty, rate path outlook, and more.

Next, Craig Fuller, FreightWaves CEO, joins 'The Exchange' to discuss what's going on with freight activity.

Third, on a more positive note, Ira Robbins, Valley Bank CEO, joins 'Power Lunch' to discuss consumer sentiment, lending and the regional banking environment.

Fourth, Nouriel Roubini, chair and CEO of Roubini Macro Associates, says US exceptionalism will remain despite bad trade and immigration policies. He speaks during an interview on "Bloomberg The Close."

Firth, Adam Parker, Trivariate Research CEO, joins 'Squawk on the Street' to discuss earnings, Trump's trade war and the choppy market.

Sixth, 3Fourteen Research's Warren Pies, JPMorgan’s Stephanie Aliaga and Truist’s Keith Lerner, join 'Closing Bell' to discuss Trump's trade wars, the technical levels of a market bottom and their overall outlook. Take the time to watch this discussion.

Lastly, Aswath Damodaran, NYU Stern school of business, joins 'Closing Bell' to discuss his valuation of the Mag 7. Damodaran isn't throwing in the towel on Mag-7 stocks and I think he's right.

Today, CDPQ published its 2024 Annual Report:

CDPQ today released its Annual Report for the year ended December 31, 2024, titled “Investing for future generations”.

In addition to the financial results published on February 26, CDPQ presents an overview of its activities over the last year, which include:

• A presentation of CDPQ’s depositors and their respective net assets as at December 31, 2024
• A detailed analysis of the returns for the global portfolio and for the different asset classes
• A risk management report
• A portrait of CDPQ’s activities in Québec, including its main achievements to support company growth and projects that contribute to economic development, as well as a summary of its investments in Québec
• A section on governance, including reports from the Board of Directors and its committees covering audit, governance and ethics, investment and risk management, human resources management and compensation for senior management and employees, as well as compliance activities
• The Sustainable Development Report
• Our financial report and the organization’s consolidated financial statements
• Report on compliance with the Global Investment Performance Standards (GIPS).

The Annual Report Additional Information for the year ended December 31, 2024, was also published today.

ABOUT CDPQ

At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public pension and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2024, CDPQ’s net assets totalled CAD 473 billion. For more information, visit cdpq.com, consult our LinkedIn or Instagram pages, or follow us on X.

Take the time to read CDPQ's 2024 Annual Report here.

The Annual Report Additional Information for the year ended December 31, 2024, was also published today.

Recall, I already went over the 2024 results with Vincent Delisle, CDPQ's Head of Liquid Markets. You can read that comment here. 

The annual report comes out later than the release of the results because it needs to be approved by the Quebec National Assembly.

It is beyond the scope of this post to go over the entire annual report, it takes at least a week to go over it in fine detail.

Still, I'd like to quickly go over a few things.

First, the message from Chair Jean St-Gelais:

 

I note the following: 

In light of these achievements, the Board has a positive view of the 2024 financial year, during which CDPQ was able to improve its depositors’ financial health and position its portfolio well for continued success. On behalf of the members of the Board, I would like to thank all CDPQ employees for the commitment they demonstrate every day. 

I will come back to this below because as always, CDPQ has some critics who claimed bonuses were outrageous this year.

I also noted this:

Throughout the year, the Board of Directors and its committees oversaw the implementation of CDPQ’s strategic orientations, as well as sound governance and the maintenance of the highest standards in all areas. We also ensured that the activities complied with the Act respecting CDPQ, as well as the depositors’ and its own investment policies. 

There was obviously no mention of CDPQ being rocked by a major bribery scheme in India but I can assure you the Board had to shore up governance to make sure this never happens again.

Next, let's quickly go over CEO Charles Emond's message below:

I note the following:

Despite the turbulence, our net assets have grown by $133 billion over five years, reaching $473 billion at the end of 2024. Over this period, we generated $6 billion in value added and $17 billion over ten years. The results that CDPQ obtained over the last ten years have also helped improve the financial health of the plans of our clients: 48 depositors, each with their own investment policy and specific risk tolerance.

For 2024, the Québec Pension Plan, the pensions for more than six million Quebecers, posted a return of 11.0%. Our total portfolio generated a return of 9.4% over one year. Its performance was driven by our activities in the public equity markets, which stood out against indexes that are more concentrated than ever. Among other drivers, our private equity investments rebounded strongly and our infrastructure assets have once again delivered solid performance. The year proved to be more difficult in real estate due to our longstanding exposure to the U.S. office sector, which faces persistent challenges. Lastly, the rise in long-term rates weighed on our fixed income activities, which  nevertheless present attractive prospects due to a high current yield. The financial health of our main depositors’ plans therefore improved in 2024.

Rising asset values and higher yields lowers future liabilities and improves the financial health of CDPQ's depositors.

Next, let's look at 2024 highlights:

 

Next, I want to discuss long-term performance:

 Important items worth noting so pay attention here:

•  Over five years, the annualized weighted-average return on depositors’ funds was 6.2%. Over the period, the total portfolio outperformed its benchmark portfolio, which posted an annualized return of 5.9%, representing $6 billion in value added. 
• Over ten years, the annualized return on the total portfolio was 7.1%, surpassing the benchmark portfolio’s 6.5% return. This has enabled the portfolio to generate $17.1 billion in value added during this time.

Now, why am I bringing this up? Because critics focused on the fact that CDPQ generated 9.4% last year, below the benchmark portfolio’s 11.8% gain or -$10.1 billion in value added.

As I've stated many times on my blog, all of Canada's large pension investment managers underperformed their benchmark last year mostly owing to the relative performance of private equity relative to a public equity index dominated by Mag-7 dynamics.

This is why it's more important to look at 5 and 10-year annualized returns relative to benchmark to gauge value added and keep in mind, compensation is based mostly on 5-year relative performance.

I think a few people commenting on Julien Arsenault's La Presse article got it all wrong here, focusing way too much on one-year return.

I also noted his in the annual report:

It is also worth noting the significant impact that the customized rate exposure product—a tool depositors have been using increasingly in the last two years—had on the overall portfolio’s performance. This product allows them to be more exposed to the interest rate factor, in particular to ensure a better match with their long-term liabilities and greater diversification of their funds. The result is more stable funding of their plans, but the return on funds is more sensitive to rate fluctuations.

With interest rates rising as they have in recent years, the use of this product limited the performance of CDPQ’s total portfolio (see Table 21, page 42). Conversely, depositor plan liabilities saw a general  decrease, which, combined with the return on assets, improved their financial health.

Keep all this in mind as you analyze results properly.

Next, have a look at CDPQ's asset mix and hw it shifted in 2024 relative to the previous year:

There was a slight increase in Equities due to the strong performance there and a slight decrease in Real Assets due to the underperformance in Real Estate:

The outperformance in all the Public Equities mandates was particularly striking last year and I doubt they will be able to keep that up this year but I'm rooting for them.

And Private Equity's 17.2% return underperformed its benchmark return of 20% but again, this is an exceptionally strong performance and benchmark was driven by a handful of tech stocks last year.

The same goes for Infrastructure which gained a solid 9.5% last year, underperforming its benchmark which gained 15% (lots of beta in that benchmark!).

Anyway, the main thing to remember is even though CDPQ didn't outperform its benchmark last year, it posted a solid year.

I would invite you to read the entire annual report here to fully appreciate all the activities at the organization.

Lastly, on compensation which is a hot topic in the media, some tables:

Again, compensation is based mostly on five-year results and yes, all these people are extremely well compensated not just by Quebec standards but by any standard and they know it.

As Derek Murphy once told me when I was working at PSP: "This is the best gig in the world".

Tell me about it, at least he was honest about that.

By the way, I will give credit to Julien Arsenault of La Presse for writing an article earlier this month where he went over the huge severance packages given out at CDPQ over the last two years.

But even there, I caution my readers, the longer someone is at an organization and the higher up they are, the more expensive their severance package will be.

The table below is available through CDPQ's answers to access to information (only available in French):

Helen Beck and Marc Cormier obtained the highest severance packages in 2023 and 2024 because they were there the longest and had very senior positions.

Alright let me end it there, it depresses me seeing how much money all these people are making even if it's justified.

Below, CNBC’s Steve Liesman and Cleveland Fed President Beth Hammack joins 'Squawk Box' to discuss the state of the economy, impact of policy uncertainty, recession concerns, the Fed's inflation fight, rate path outlook, and more.

Mary McDougall, Alexandra Heal and Sun Yu of the Financial Times report pension groups cut back on pioneering private equity investments:

Top pension funds are stepping back from competing head-on with private equity groups to buy up companies, instead opting to invest alongside them to secure access to the best deals.

Caisse de dépôt et placement du Québec (CDPQ) and the Ontario Municipal Employees Retirement System (Omers) are scaling back the proportion of their funds exposed to directly owned private companies, while Ontario Teachers’ Pension Plan has said it is eyeing more strategic partnerships.

A tough period for exiting investments over the past two years has encouraged the Canadian pension groups to back more companies alongside huge private equity managers as direct ownership has become increasingly challenging, requiring big in-house teams and a higher risk appetite.

“The private equity downturn is making the direct investing model harder as we are facing a shortage of viable projects and difficulty in exiting from our existing investments,” said an executive at one of the funds.

There are three main ways pension funds allocate to private equity: direct investing, where they buy a stake in a company on their own; through a private equity fund; or through co-investments, where they invest in companies alongside a private equity fund but without having to pay the fund fees.

Canada’s $3.2tn pension system is a major private equity investor with 22 per cent of its public sector funds’ assets allocated to the asset class, according to think-tank New Financial.

At present, the nine biggest Canadian pension funds have about half of their private equity exposure in buyout funds and half through direct holdings and co-investments, according to analysis from CEM Benchmarking.

But that balance has shifted as pension funds have come under pressure to invest in buyout funds to secure access to the best co-invest deals, where they get to invest alongside the firms but without having to pay fund fees.

CDPQ is in the second year of a five-year plan to lower the proportion of direct private equity investments from 75 per cent to 65 per cent, while Omers pivoted from allocating very little to private equity funds to announcing last September it would no longer invest directly in European opportunities.

Ontario Teachers’ has said it is “tactically looking to invest more with other partners in areas where it makes sense as the portfolio and market evolves”, though direct investments are still a core part of its strategy.

The shift comes as the private equity industry has ballooned in size, resulting in fierce competition for both assets and talent — and as some Canadian pension funds are also rethinking their US exposure.

Marlene Puffer, former chief investment officer at Alberta Investment Management Corporation, said Canadian pension funds were “in the boat of having to add more value into every holding because exits are more challenging now — they have to do more hands on management and it becomes increasingly complex”.

She added that pension plans allocated money to private equity funds on the understanding that they would be invited to invest in many of the co-investment opportunities that arise with them.

It was “difficult for Canadian pension funds to compete for talent with Apollo that pays much better”, another fund executive said.

Martin Longchamps, CDPQ’s head of private equity and credit, said the rationale behind its shift towards more partnerships was to “drive access to deal flow through those relationships”. Omers’ chief investment officer, Ralph Berg, said the pension fund had “evolved our investment strategy over the last couple of years to explore different models and use funds where it is complementary”.

Canada Pension Plan Investment Board, the country’s largest pension fund with C$699bn (US$504bn) in assets, said it had “always pursued a partnership strategy and continue to be committed to that approach”.

I read this article yesterday and it brought me back to a meeting I had with Mark Wiseman when he was CEO of CPP Investments years ago.

We were in a small conference room at their offices in Toronto and he explained to me while they mostly do direct investing in infrastructure and real estate, in private equity all they were doing back then was investing in top funds and co-investing alongside them on larger transactions.

"If I could afford to hire David Bonderman, I would but I can't so we invest in his fund and co-invest alongside them on larger transactions." 

Wiseman successor, Mark Machin, told me the same thing when I met him n Montreal:"In private equity all we do is invest in top funds and co-invest with them on larger transactions to reduce fee drag."

John Graham also expressed the same views when I met up with him here in Montreal.

That's three CEOs of the largest and most important pension fund in Canada with the biggest private equity portfolio in the world among institutional investors expressing the same thing.

Basically, if you can't beat them, join them and negotiate hard on co-investments to lower fee drag.

There is nobody working at a pension fund in Canada who can compete with the world's top private equity funds. 

Sure OMERS and OTPP did some purely direct deals and some were incredibly profitable over the long run but it's almost impossible nowadays to compete with the top private equity funds and things are also changing in infrastructure and real estate.

Just like top hedge funds that pay big commissions to investment banks gain access to the best trades first, top private equity funds  that pay huge advisory fees to big banks are get the first phone calls when a major deal is in the works.

It doesn't mean that there aren't good private equity managers at Canada's large pension funds, it just means they cannot compete head on with top PE firms.

And to be clear, the majority of direct private equity investing at Canada's Maple Eight is co-investing alongside top funds (a form of direct investing) not purely direct investing where they source deals themselves.

What about Erol Uzumeri, one of the founders of Searchlight Capital Partners?  He came from OTPP Private Capital.

Yes he did and he was lucky that Derek Murphy, former Head of PE at PSP, seeded him because without that anchor investor, Searchlight would have never gotten off the ground.

Same goes for Steve Faraone and Mike Murray of Peloton Capital Management. They too came from OTPP Private Capital and were lucky billionaire Steven Smith seeded them and IMCO made an allocation to them because phone calls were made at the highest level.  

Don't get me wrong, Erol, Mike and Steve are all excellent private equity investors but no way in hell would they be where they are without seed capital from major anchor investors.

The bottom line is this, if you're as good as KKR, EQT, TPG, Blackstone, Apollo, etc. then why would you work at a Canadian pension fund? 

The same goes when traders who use pension fund's balance sheet tell me "You know, I can easily work at a big hedge fund."

I laugh and tell them straight in their face: "No you can't buddy because if you can work at Citadel, Millennium, Bridgewater or Rokos Capital Management, you would be there making millions in bonuses every year."

Again, it doesn't mean they are bad traders but the world of elite hedge funds is on another level, just like the world of elite private equity funds.

What else do I want to get off my chest?

OTPP once did a performance attribution on their private equity holdings and it turned out co-investing and direct investments were the best performers over the long run and the worst performance came from fund investments and syndicated investments where they got a small slice and didn't do their own due diligence on a deal. 

Again, they had done some great purely direct deals years ago but times have changed drastically which is why OTPP is reassessing its private equity approach.

Same goes for OMERS and others, there's simply no choice, times have changed, adding value is harder, exits are extremely challenging, competing in this arena with top funds is not in the best interest of your pension fund.  

And times are also changing for real estate and infrastructure so large pension funds better adapt fast or risk underperforming there too.

And by adapt, I mean invest in top funds and co-invest alongside them.

The world of pension fund investing in private markets is all becoming investing in strategic partners that can add value over the long run.

Always remember what Mark Wiseman told me: "If I could hire David Bonderman, I would but I can't afford him."

It's that simple folks, let's not make it out to be more complicated than what it truly is. 

Private equity will always remain an important asset class but if you don't have the right approach investing in top funds and co-investing alongside them on larger transactions to reduce fee drag, you're going to significantly underperform over the long run.

Below, Joseph Bae, Co-CEO, KKR discusses what's driving private equity returns and where its finding value across the market with Bloomberg's Sonali Basak at Bloomberg Invest.

And Bruce Flatt, CEO, Brookfield discusses tariffs against Canada, structural trends in asset management and investing in digital infrastructure with Bloomberg's Erik Schatzker at Bloomberg Invest.

Both interviews are from a month ago and well worth watching.

Layan Odeh of Bloomberg News reports CAAT Pension Plan CIO hunting for more private investments at home:

CAAT Pension Plan is searching for Canadian real estate and infrastructure investments, continuing its strategy of investing for the long term as U.S. President Donald Trump’s erratic trade policy disrupts public markets.

Canadian investments comprise about a quarter of the Toronto-based fund’s $23.3 billion (US$17 billion) of assets, CAAT said in a statement Tuesday, when the pension reported a 15.2 per cent return for 2024.

“We are very interested in continuing to invest in our own country,” Chief Investment Officer Asif Haque said in an interview, adding that the firm is also “intrigued” by opportunities in European private markets and Asian investments.

Canadian pension fund managers are grappling with a new reality this year amid Trump’s unpredictable trade policy, which has disturbed public markets and weakened the outlook for U.S. private equity deals. While the market volatility concerns Haque, he said he also sees “pockets of opportunity” across public and private markets.

The fund’s returns were driven by investments in public equity such as stocks and private equity, which gained 29 per cent and 16 per cent, respectively. Real assets returned 4.6 per cent, while commodities earned about 17 per cent. Credit advanced 11 per cent.

The pension plan will continue building out its real estate and infrastructure portfolio this year after making some investments in energy transition, industrial real estate and multiresidential properties. Real assets comprise 17 per cent of the pension’s total, and CAAT aims to boost that to 25 per cent.

Originally created for the Ontario college system, CAAT now invests pension assets for 700 employers and more than 110,000 members in various industries.

Earlier today, CAAT Pension Plan reported a strong financial performance in 2024:

Strong investment returns lead to growth in total assets. Healthy funding reserves provide peace of mind for Plan members and employers

TORONTO, April 22, 2025 — CAAT Pension Plan ("the Plan") released its 2024 Annual Report today. The Plan’s investment portfolio recorded a 10-year annualized net rate of return of 9.6% as of December 31, 2024. The Plan outperformed its policy benchmark by 1.5% per year over this 10-year period. This strong performance was supported by an annual net rate of return of 15.2% in 2024.

At year end, the Plan had $23.3 billion in total assets under management, up from $20.1 billion in 2023. Funding reserves, which can serve as a cushion against market and demographic volatility, were $6.1 billion as of January 1, 2025. As previously reported, the Plan has set aside $1.24 for every dollar promised in pensions, or a funding level of 124 percent on a going-concern basis. With the Plan’s continued financial strength, CAAT committed to pay its conditional inflation protection enhancements to 2028; a promise it has maintained since the policy was introduced in 2007.

Secure, even in uncertain times

“Employees want a strong, sustainable pension plan that delivers the unparalleled value of predictable lifetime retirement income” says Derek Dobson, CEO and Plan Manager, CAAT Pension Plan. “Sound investment management and funding decisions helped build reserves to allow the Plan to continue to grant valuable benefit enhancements even in times of economic uncertainty. This sense of strength and stability improves employee wellbeing long before retirement, which is why demand for high-performing workplace pensions continues to grow.”

The Plan’s assets are invested in a broadly diversified portfolio, including public and private equities, nominal and inflation-linked bonds, real assets and commodities.

“All asset classes in the Plan’s portfolio contributed positively to performance during 2024”, says Asif Haque, Chief Investment Officer, CAAT Pension Plan. “While we are gratified by the strong results for the year, we are especially pleased that long-term investment performance has contributed to furthering the health of the Plan.”

Workplace pensions can build a more resilient domestic economy

Leaders in Canada’s public, private and not-for-profit sectors are looking to build a more durable domestic economy. Providing Canadians with greater access to workplace pension plans can contribute to this goal. Plans that provide a predictable stream of retirement income for life can boost productivity, support local businesses and contribute to the country’s economic growth and prosperity. In 2024, for instance, CAAT paid out $724 million to retirees or their beneficiaries, improving financial security for members and supporting local economies across Canada. It also allocated more than 25% of its investment holdings in Canadian equities, bonds, real estate and infrastructure.

In providing greater access to workplace pensions, the Plan also achieved an important milestone in 2024. Membership surpassed 100,000 employees in Canada and has more than doubled its size since the Plan introduced its DBplus design in 2018, opening its workplace pension solution to the private, non-profit and broader public sectors. The number of employer sponsors has expanded from approximately 50 to over 700 during the same time.

Other highlights from the 2024 Annual Report include:

• Ranked #1 highest performing Canadian pension plan in the BNY Mellon Canadian Master Trust Universe, based on 10-year investment returns at the end of 2024 for plans with a market value above $1 billion.
• Introduced the GROWTHplus Investment Account, a voluntary, tax-sheltered savings option available to Plan members that allows any additional savings to benefit from the CAAT net rate of return.
• Nine in 10 members reported trust in the CAAT Plan and confidence that their pension benefits are secure.
• Recognized as a Top Employer and Best Place to Work by Benefits and Pensions Monitor.

About CAAT:

Established in 1967, the CAAT Pension Plan is an independent, jointly governed plan that offers highly desirable modern defined benefit pensions. Originally created to support the Ontario college system, the CAAT Plan now proudly serves more than 700 participating employers in 20 industries, including the for-profit, non-profit, and broader public sectors. It currently has more than 110,000 members. The CAAT Plan is respected for its pension and investment management expertise and focus on stability and benefit security. On January 1, 2025, the Plan was 124% funded on a going-concern basis.

Late this afternoon, I had a Teams meeting with CAAT Pension Plan CIO Asif Haque and Chief Pension Officer Evan Howard going over the results and Plan activities.

Before getting to that discussion, I urge my readers to g over the 2024 Annual Report here. 

I actually read it all and it's very well written so let me go over some things below.

First, the message from Chair Kareen Stangherlin and Vice-Chair Virginia Di Monte:

 

I'd like to also congratulate CEO and Plan Manager Derek Dobson for celebrating his 15th year at CAAT Pension Plan.

I also note the most important passage in the Chair and vice-Chair's message:

In 2024, the Plan maintained a healthy funded ratio of 124% and built reserves to a total of $6.1 billion, which serve to cushion against potential changes in investment markets or unexpected liability growth. This funding strength, along with CAAT’s leadership expertise, has helped Plan governors make decisions that will benefit members and employers in 2025 and beyond, including, as previously announced, reducing contribution rates for DBprime benefits and increasing the DBplus benefit factor on contributions starting January 1, 2025.

After growing to over 100,000 total members last year, CAAT launched an innovative workplace retirement solution, GROWTHplus Investment Account, allowing members the option to save more by investing with the pension plan they know and trust. At its core, the design delivers on a vision that has catapulted CAAT since it opened membership to its defined benefit (DB) plan: to offer members efficient ways to save towards a more secure retirement, while keeping costs and risks low for employers.

CAAT Pension Plan enjoys one of the best, if not the best funded status in Canada and is doing its part in offering safe, secure and cost efficient DB pensions to members across the public and private sector.

The organization also introduced GROWTHplus allowing members to save more by investing with CAAT Pension Plan:

In October 2024, CAAT launched its latest innovation: GROWTHplus, an optional savings account for Plan members to grow their tax-sheltered savings and benefit from CAAT’s investment returns. Available at no additional cost to employers, the account provides added value to members’ lifetime pension with CAAT through both its investment scale and expert management.

Next read the message from Derek Dobson, CAAT Pension Plan CEO and Plan Manager: 

 I note the following:

Our secure pension promise is built on a solid financial foundation. I am pleased to share the Plan remains 124% funded, holding $23.3 billion in total assets under management and $6.1 billion in funding reserves. The fund’s diversified investment portfolio recorded an annual net rate of return of 15.2%, contributing to a 10-year annualized net rate of return of 9.6%. The Plan extended conditional inflation protection enhancements to 2028, an enhancement that has been granted every year since its introduction in 2007.

These strong results are more assuring when you consider that they include the previously announced improved DBplus benefits and reduced DBprime contributions. On top of this, Plan governors reduced the discount rate by 15 basis points to 4.75%. A lower rate reflects a measured risk tolerance and prudent assumptions of expected returns to manage liabilities in the long run. This approach puts our commitment to benefit security at the centre of management and funding decisions.

As we continue to manage long term risks, we do so in an increasingly challenging market environment. These conditions underscore the importance of the Plan's robust approach to safeguarding benefits and building reserves. With a diversified portfolio and robust reserves set aside to protect the Plan against economic shocks, our members and employers can be confident in the resilience and sustainability of their pension plan.

Alright, let me also provide some highlights and other pertinent information to help my readers understand CAAT Pension Plan's portfolio:

First, the 2024 highlights:

 

 Next, have a look at CAAT Pension Plan's long-term asset mix target:

 

The portfolio above is where the asset mix is heading over time.

Below is the actual asset allocation, including the effect of derivatives and the associated benchmark index as at December 31, 2024 (from page 60 of the Annual Report):

From what I can tell, there was a slight decrease in Real Assets last year (from 19% to 17%) and Commodities (from 5% to 4%) and a slight increase in Public Equities (from 30% to 32%) and Credit (from 6% to 7%).

And here are the net investment returns by asset class for 2024:

And the net Fund returns vs policy benchmark:

Like almost all its peers, CAAT Pension Plan underperformed its policy benchmark last year due to the strong performance of Public Equities which made the benchmark in Private Equity surge (PE returned 16% relative to benchmark return of 31% made up of MSCI ACWI +3%):

The Plan’s assets totaled $23.3 billion at the end of 2024 (up from $20.1 billion in 2023). The investment portfolio returned 15.2% in 2024, net of fees. All asset classes contributed positively to returns during the year, led by Public and Private Equity. The portfolio underperformed its policy benchmark in 2024, due to the Private Equity asset class lagging its benchmark. Over the past 10 years, Private Equity has outperformed its benchmark significantly.

This is why I keep emphasizing it's important to look at long-term performance over 5 and 10-year periods and in this regard, CAAT Pension Plan continues to outperform its policy benchmark adding 1.2% and 1.5% respectively over the last five and ten years..

In fact, in their press release, it states the Plan ranked #1 highest performing Canadian pension plan in the BNY Mellon Canadian Master Trust Universe, based on 10-year investment returns at the end of 2024 for plans with a market value above $1 billion.

That long-term performance is very impressive but the most important thing to note is the Plan's funded status remains extremely strong at 124% and they took measures to ensure the funded status remains strong no matter what happens in markets.

Discussion With Asif Haque and Evan Howard

As I stated above, this afternoon after markets closed, I had a chat with CIO Asif Haque and CPO Evan Howard.

I want to thank both of them and also thank Andrew Seymour and Theresa Wilson for setting up this meeting.

I began by asking Asif to give me an overview of their performance:

If there's three things we want people taking out of that annual report. From an investment standpoint, we care very much about investment performance over the long term doing what it needs to do to make sure the Plan health is supported and enhanced where we can. And our 10-year performance of 9.6% net of fees more than fills that bill and we're very proud of that.

Also you know well from our previous conversations, active management is an important part of our investment program and an important part of our value proposition and over a ten year period, we outperformed our policy benchmark by 1.5% net of fees, so again something we are quite proud of. Value added across all asset classes over the long term period.

We don't think about the 15.2% that we able to generate last year net of fees. We can talk about that but you know what markets were doing in 2024. 

The last thing I would say is the discussion in Canada right now given the macroeconomic headwinds is all about resilience and the Plan is resilient. That's the thing we are most proud of and we are happy with $23 billion in assets and we now have over $6 billion in reserves to help buffet the Plan against economic headwinds, market shocks, demographic changes, etc.

So the long term performance, the one year return and the resilience baked into the Plan are the three things from a financial perspective we'd want people to take away.

Evan Howard, the Chief Pension Officer then gave an overview of the Plan's activities last year:

It's in the report but we passed some significant thresholds this year. We surpassed 100,000 members during 2024 and entered the year with over 111,000 members, really more than doubling the membership we had when we started all this. 

On the employer side, ended the year with over 700 participating employers which again coming a long way from the 30 Ontario community colleges and employers that are our roots.

The other big milestone is we did the GROWTHplus investment account which is  a voluntary savings account available to all of our Plan members and allows them to earn the CAAT return on their tax-sheltered savings.

I asked Even if this replaces a TFSA and he replied:

It's not a TFSA. As far as the Income Tax Act, it's considered an "AVCA" or an additional voluntary contribution  account and it's subject to the same pension adjustment contribution limits that an RRSP would be subject to.

Right now, if a member has assets in their RRSP whether they're locked in or not locked in, they can transfer hose to us. Right now we are only taking transfers but over the course of this year we are building capacity for members to provide payroll based contributions if they have an excess contribution room that they can then direct a monthly amount into if they wish to.

Since they just launched it late last year, the uptake reported in the annual report is $5 million so far which Evan told me is in line with their expectations.

I asked him what is the typical profile of employees and employers in their Plan and he responded:

It's a mix. There's definitely many smaller employers from the non-for-profit sector or the private sector. One of the great things is these are employers where gaining access to a defined benefit plan is something they wouldn't be able to do on their own.  

Another employer that joined us effective at the beginning of this year is West Jet in respect to all their pilots.

Evan also reminded me they have an arrangement with Lawyers' Financial, formerly Canadian Bar Insurance, for lawyers to join their Plan. 

I shifted my attention back to performance and noted even though the Plan underpeformed its benchmark last year, it was the same story, Public Equities soared so Private Equity underperformed its benchmark despite posting another solid year.

Asif responded:

That's exactly right, the absolute return of Private Equity in 2024 was 16%. On an absolute basis a very strong return but yes, against a Public Equity focused benchmark given Mag-7 dynamics last year, it underperfomed on a relative basis. We don't think about the performance of Private Equity on a one-year basis but that's what it was in 2024. But longer term, more than 20% return out of Private Equity for the 10-year period, quite a bit exceeding its benchmark for that 10-year period. So both on an absolute basis and relative to benchmark basis, we are very pleased with our PE portfolio over a longer period.

No question about it, it's an excellent performance over a longer period and even returning 16% last year is nothing to sneeze at.

I noted they marginally beat their Public Equity index last year 28.9% vs 28.2% and asked whether external hedge funds helped them do that. Asif replied:

You remember that a large part of our Public Market program is a portable alpha structure and yes, the impact of a hedge fund program was a meaningful contributor to value added. The traditional long only public equity portfolio was more or less flat for the year in terms of benchmark relative performance so it really was the hedge fund side that led to that outperformance for the one-year period.

But again the longer term performance even in public markets is what we care about and the value added in all public market asset classes has been positive driven by both hedge funds and long only funds.

I then noted that Real Assets made up of Real Estate and Infrastructure returned 4.6% last year and asked him what is the mix between the two in terms of exposure there and he told me 60-40 between Infra and Real Estate (or 65-35 but he didn't have the specific figures in front of him). He told me "it is titled towards Infrastructure but not in a huge way."

He told me they had a strong year in Infrastructure and Real Estate wasn't that bad, "flat or slightly down on an unhedged basis for the year but again these are asset classes where we care very much about the long-term performance and their contribution to the Plan's health over the long term, again, we are very pleased".

The Real Assets portfolio is very important and I noticed they increased their allocation to Credit to 7% last year, coming closer to the 8% long-term target.

I also mentioned in the Bloomberg article, the perception it left me was they're moving away from US assets to find opportunities in Europe and domestically here in Canada and asked him to clarify. 

Asif responded:

I would say the Credit portfolio is a global portfolio so there is no distinct intention to look at European opportunities, it's more global. When I was talking about opportunities in Europe, we were leaning a bit more toward the Real Asset side, we were seeing more opportunities in Infra and Real Estate space in Europe in 2024 and we are looking at other opportunities in 2025.

In terms of policy uncertainty in the US and whether that is influencing allocations, he added:

No, I would say we are continuing to look at all the different asset classes that meet what we require in terms of enhancing the overall health of the Plan over the long run. We look globally for those opportunities so that hasn't changed, our focus on looking fo the best opportunities wherever they may be around the world, that has not changed.

Part and parcel of that is we are always looking for great opportunities here at home. And we have through 2024 and again in 2025 been finding good opportunities again mainly in the Real Assets space in Canada and we are very pleased about that.

So, it's not in any way a shift  away from one geography into many others. We continue to have a global view, we continue to have  along-term view and it so happens we've been finding great opportunities that enhance the health of the Plan in Canada.

I ended by asking him given the volatility in markets if they are implementing any shifts and he said given over the short term they are shoring up liquidity and risk management but their focus remains on the long term.

I thank Asif and Evan for taking the time to chat with me, and I just noticed the Toronto Maple Leafs are leading the Ottawa Senators 2-1 at the end of the second so Asif should be very happy (and I want to catch the third period action).

Below, CNBC's 'Fast Money' traders react to Pres. Trump's comments that he does not intend to fire Fed Chair Powell. Hallelujah! Let's hope he has finally seen the light there!