Nov. 11 (Bloomberg) -- Caisse de Depot et Placement du Quebec will probably lag behind other Canadian pension funds this year because it cut back on equity holdings and missed part of the stock rally, Finance Minister Raymond Bachand said.

“I don’t expect the Caisse to surpass the markets this year,” Bachand told Radio-Canada television in an interview. “The Caisse was underweight in stocks, and given the fact that stock markets have rebounded considerably, the results of the Caisse will certainly not exceed those of competing pension funds.”

The Caisse is set to post a return on investments of about 5 percent to 6 percent this year, compared with an average gain of 10 percent to 12 percent for Canadian pension funds, La Presse newspaper reported today, citing unidentified people familiar with the matter.

Bachand’s ministry is responsible for the Montreal-based Caisse, which is owned by the French-speaking province. As of Dec. 31, the Caisse oversaw C$120.1 billion ($115 billion) after reporting a record loss of C$39.8 billion for 2008.

In August, the Caisse reported “neutral” returns for the first half of 2009 as an unrealized loss of C$5.7 billion on real estate wiped out a 5 percent gain by other investments.

The 2009 results will be the first under Chief Executive Officer Michael Sabia, the former BCE Inc. CEO who took over in March. The Caisse later hired a new chief investment officer, Roland Lescure, who came over from Groupama Asset Management.

“Mr. Sabia has my full confidence,” Bachand said. “The measures that he has put in place to regain control over risk management are adequate.”

Markets Rebound

Stock markets have climbed this year amid growing investor optimism that the world economy is poised to emerge from recession. As of the close of trading yesterday, the Dow Jones Industrial Average gained 17 percent this year, while Canada’s benchmark Standard & Poor’s/TSX Composite Index rose 27 percent.

Canadian pension funds earned an average 14 percent on investments in the first nine months of 2009, according to a survey by RBC Dexia Investor Services. Pension funds polled by RBC Dexia manage a combined C$310 billion.

As of the end of 2008, the Caisse had about 22 percent of its net assets invested in stocks, or C$26.4 billion, and 12 percent in private equity. Caisse spokesman Maxime Chagnon didn’t immediately return a message today seeking comment on Bachand’s remarks.

The Caisse is scheduled to report 2009 results in February.

To contact the reporter for this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net.

Last Updated: November 11, 2009 11:14 EST