What Does PSP Investments Put Its Money Into—And Why?
The Public Sector Pension Investment Board (PSP Investments) is one of Canada's largest pension investors, managing $264.9 billion in assets as of the end of its 2024 fiscal year. Founded to safeguard the retirement futures of public sector workers, members of the Canadian Forces, and the Royal Canadian Mounted Police, PSP’s investment choices reflect a careful balancing act: achieving high returns while keeping risks in check.
A Portfolio Built on Diversification
PSP Investments takes a global, multi-asset-class approach, allocating capital across equities, private assets, real estate, and infrastructure. The philosophy is clear: diversify to protect against market downturns while delivering consistent, long-term returns.
At the heart of PSP’s portfolio are capital markets, which account for 42.2% of its net assets under management (AUM). This segment focuses on public equities and forms the foundation of PSP’s strategy. Yet it’s the private equity portfolio that stands out, boasting a robust 14.8% five-year annualized return. This segment accounts for $40.4 billion (15.3% of total AUM) and focuses on high-growth, scalable investments across industries ranging from technology to insurance.
On the real assets side, infrastructure investments play a pivotal role, with $34.5 billion allocated to projects such as renewable energy and utilities. PSP's infrastructure portfolio, which includes wind farms across Canada and a controlling stake in Athens International Airport, aims to provide inflation-protected returns—a crucial feature for pension liabilities tied to long-term inflation risks.
Natural resources—think timberland and agriculture—make up 5.7% of the portfolio, adding an element of downside protection thanks to their uncorrelated performance with traditional markets. PSP is now one of the world’s largest owners of farmland and forests.
The Canadian Factor
Despite its global reach, PSP remains tied to its home market. About 19% of its assets are invested in Canada, with significant holdings in real estate, public equities, and infrastructure. For example, its recent acquisition of Hydroméga Services Inc. expanded its renewable energy footprint domestically, adding 2,000 MW of wind, solar, and hydro projects to its pipeline. Hydroméga’s long-standing collaboration with Indigenous communities aligns with PSP’s broader ESG priorities.
PSP’s Canadian investments are not just about patriotism. They reflect a strategy to anchor its portfolio with assets that deliver stable, inflation-sensitive returns, such as infrastructure projects. The firm has also backed local innovation, partnering with venture capital managers like Radical Ventures to tap into emerging tech trends.
Betting Big on Private Markets
A defining characteristic of PSP’s portfolio is its tilt toward private markets, which now account for nearly 50% of its AUM. The rationale is simple: while private assets are less liquid, they offer higher returns and diversification benefits compared to public markets. Infrastructure, real estate, and private equity are all designed to match the liabilities of its pension plans, which stretch decades into the future.
Private equity investments reflect PSP’s willingness to double down on sectors it understands well. Its initial 2015 investment in Amwins Group, a U.S.-based specialty insurance broker, has been a resounding success. The deal paved the way for further investments in Alliant Insurance Services and Convex Group, building a network across the specialty property and casualty insurance sector. These investments have consistently outperformed, even amid economic headwinds.
Specific Examples of Investments
PSP Investments’ portfolio is a rich tapestry of projects and assets spanning multiple sectors and geographies, reflecting its commitment to diversification and resilience. Among its recent high-profile investments is the acquisition of Hydroméga Services Inc., a Canadian renewable energy producer with a development pipeline of over 2,000 MW across wind, solar, storage, and hydroelectric projects. This acquisition not only bolstered PSP’s renewable energy footprint but also underscored its dedication to sustainable investing. Hydroméga has long been a pioneer in renewable energy development and operations in Québec and Ontario, and the deal includes partnerships with Indigenous communities, providing shared economic benefits and fostering long-term local engagement.
In infrastructure, PSP significantly expanded its aviation portfolio by increasing its stake in Athens International Airport to over 50% during the airport’s IPO in early 2024. Athens International Airport, one of Europe’s fastest-growing hubs, welcomed 28.2 million passengers in 2023—a 24% year-on-year increase—and was named “Best Airport in Europe” by ACI EUROPE in its size category. Managed through PSP’s subsidiary AviAlliance, the asset exemplifies PSP’s strategy of investing in inflation-protected, high-performing infrastructure with stable cash flows.
Another standout investment lies in PSP’s natural resources portfolio, which is now valued at $15.2 billion. This includes timberland and agricultural assets designed to provide diversification and inflation protection. A notable initiative within this space is Mosaic Forest Management’s BigCoast Forest Climate Initiative, which deferred logging on 40,000 hectares of private land in British Columbia, generating carbon credits under the Verified Carbon Standard. This program aligns with PSP’s commitment to sustainability while offering strong downside protection in volatile markets.
In private equity, PSP’s strategic investments in the specialty property and casualty insurance sector have delivered significant returns. The firm initially acquired a stake in Amwins Group, a U.S.-based wholesale insurance broker, in 2015. Amwins has since become one of PSP’s most successful private equity investments, delivering record returns in fiscal 2024. Building on this success, PSP expanded its footprint in the sector with investments in Alliant Insurance Services and Convex Group Limited, creating a network that spans the insurance value chain.
Closer to home, PSP has been deeply involved in urban development through its acquisition of the 370-acre Downsview Airport Lands in Toronto. The site is being redeveloped in partnership with global real estate firm Hines into a mixed-use urban space. This long-term project highlights PSP’s ability to blend real estate investment with sustainable urban planning, creating value for both the portfolio and local communities.
These examples illustrate how PSP Investments leverages its scale, expertise, and commitment to sustainability to deliver strong returns while aligning with its long-term mandate to support Canada’s public sector pension plans. Each investment reflects the organization’s ability to navigate complex markets while staying focused on its mission.
Why Sustainability Is a Strategic Priority
As a long-term investor, PSP sees sustainability not as a concession but as a competitive advantage. The organization has embedded climate considerations into its investment framework, aiming to future-proof its portfolio against the risks posed by a transitioning global economy. In 2023, PSP was tapped to manage the Canada Growth Fund, a $15 billion public initiative designed to accelerate the country’s clean energy transition.
PSP’s renewable energy investments exemplify this strategy. The acquisition of Hydroméga aligns with its belief that transitioning to a low-carbon future presents both risks and opportunities. Similarly, its AviAlliance subsidiary—an airport investment platform—has prioritized sustainability, with Athens International Airport ramping up green energy initiatives as part of its growth strategy.
The Bigger Picture
Underpinning all these decisions is PSP’s mission: to meet its mandate of delivering strong, risk-adjusted returns that ensure the sustainability of Canada’s federal pension plans. By blending public and private investments, leveraging its scale, and staying ahead of long-term trends like decarbonization and demographic shifts, PSP aims to thrive in an increasingly volatile investment landscape.
What PSP invests in is ultimately a reflection of why it exists: to safeguard the financial futures of Canada’s public sector workforce while navigating the complexities of a global economy. For this $264.9 billion giant, the question isn’t just about today’s returns—it’s about securing tomorrow’s.
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