Financial crisis all about. As economists and financial advisers watch what most are calling the “echo” of the American crisis hit Canada quite severely, Quebec’s largest pension fund has hit a wave of trouble as rating agency Standard and Poor’s placed the fund on the negative creditwatch list.

Currently rated ‘AAA’, the best rating the agency will give, Caisse faces what may be a traumatic rating cut after reporting a $40 billion - or 25 per cent - loss in 2008’s fiscal year due to asset sales and writedowns.

This loss followed a decent year in 2007 with a 6 per cent net gain in investment income, marking about $8 billion.

Caisse de Dépôt managed roughly $120 billion in net assets as of the end of 2008. The five year running average for returns on these assets is still positive, at approximately 4 per cent, marking the company’s prior stellar performance in the market.

“As with all other investors, the first element that explains our return this year is the global financial crisis that broke out in the fourth quarter. In October 2008, in a matter of days, the world tipped into the worst financial and economic crisis of the past 80 years. The markets became disjointed. All asset classes – with the exception of the best government securities – recorded steep and simultaneous losses. The lack of lenders and buyers caused market values to plummet. The global crisis also drove the Canadian dollar down sharply on the year, it lost 20% against the U.S. dollar, 16% against the euro and 35% against the yen,” explained Fernand Perreault, President and Chief Executive Officer of the Caisse, in the press release Wednesday.

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