The Public Sector Pension Investment Board (PSP Investments) has achieved a 6.5% return in fiscal 2026, pushing net assets under management to $320.6 billion. However, this falls short of the return of its reference portfolio, which is a benchmark for comparison. 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 towards equities in its benchmark. While public market equities were the top performer in PSP's portfolio with a 20.6% one-year return, the real estate segment was the worst-performing, with a -7.3% one-year return. This underperformance dragged down the five-year real estate return to -0.5%.
Deb Orida, chief executive of PSP Investments, noted that the benchmark is looked at over longer periods, and the fund has outperformed it over three, five, and ten years. She also highlighted the impact of the fund's investment in redeveloping the Downsview airport lands in Toronto's residential real estate market, which has been a significant mover for the fund this year. Private equity and credit also underperformed, with returns of 5.3% and 3.1% respectively, as they recalibrate from the post-pandemic period of 2021 and 2022.
Orida expressed optimism about the fund's future prospects, particularly in Canada. She noted that about 20% of PSP's gross assets are invested in Canada, up from 19% in fiscal 2025, and expects this to climb higher in the coming years. The fund has invested $10 billion in Canada in the last fiscal year, primarily driven by direct private investments and an increased allocation to Canadian equities. Orida is encouraged by the federal government's openness to asset recycling and believes that this could create more good opportunities for the fund to invest in Canada.
In my opinion, the PSP Investments' performance in fiscal 2026 is a testament to the fund's ability to navigate a challenging market environment. While the benchmark underperformed, the fund still managed to achieve a positive return, thanks to its diverse portfolio and strategic investments. However, the underperformance in real estate and private equity segments highlights the need for the fund to continue to diversify its investments and adapt to changing market conditions. Overall, I believe that PSP Investments is well-positioned to continue to deliver strong returns for its members in the years to come.
