The Public Sector Pension Investment Board (PSP Investments) posted a 6.5% return in fiscal 2026, increasing net assets under management to $320.6 billion, though it fell short of the return of its reference portfolio.
Underperformance Explained
The fund, which manages pension plans for the federal public service, Canadian Forces, and Royal Canadian Mounted Police, attributed the underperformance to a heavy weighting of equities in its benchmark during a year when equities surged while other asset classes struggled.
Deb Orida, chief executive of PSP Investments, noted that beating the benchmark in a strong equity market is challenging on a one-year basis but emphasized long-term outperformance.
Long-Term Value Creation
“We have outperformed it over three, five, ten years and since inception, creating billions of dollars of value relative to that benchmark,” Orida said.
Asset Class Performance
Public market equities were the top performer, delivering a 20.6% one-year return for the period ending March 31. In contrast, real estate was the worst segment, with a -7.3% return, dragging the five-year real estate return to -0.5%.
Impact of Downsview Development
Orida pointed to Toronto’s residential real estate market, particularly the fund’s investment in redeveloping the Downsview airport lands, as a significant factor. “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,” she said.
Private Equity and Credit
Private equity and credit also underperformed prior years, with returns of 5.3% and 3.1%, respectively, in fiscal 2026. Orida attributed this to a recalibration from the post-pandemic period of 2021-2022, when low rates fueled cheap borrowing and high leverage appetite.
Market Reset
Private credit faced hits from concerns over software company exposure and artificial intelligence impacts. Orida described the current environment as a healthy reset, with tighter terms and better businesses. “We’re seeing opportunities to make better investments going forward,” she said, noting PSP’s strong position as an early player in private credit with a decade of double-digit returns.
