* Caisse reports 9.3 percent return in 2017
* Caisse CEO says looking at blockchain, not bitcoin
MONTREAL, Feb 21 (Reuters) - Bombardier BBDb.TO should be "on alert" for merger opportunities that will enable its transportation unit to compete with larger rivals in an industry that is consolidating to help reduce costs, the chief executive of its biggest independent shareholder said on Wednesday.
"I think, in an industry that's consolidating to the degree that it is and given the scale issues associated with the size of the Chinese presence in that industry, the company needs to be always alert to M&A opportunities," Caisse de depot et Placement du Quebec CEO Michael Sabia told reporters.
Germany's Siemens AG SIEGn.DE last September opted to merge its rail business with France's Alstom SA ALSO.PA
instead of Bombardier's rail unit, leaving Bombardier facing a challenge to compete in a market dominated by China's state-owned CRRC, the world's largest train maker, and the combined Siemens and Alstom group.
Sabia was speaking after Canada's second biggest public pension plan reported a 9.3 percent return on its clients' funds in 2017, helped by a strong performance from its equities investments.
The Caisse, which invests on behalf of workers and retirees in the Canadian province of Quebec, has a near 30 percent stake in Bombardier's rail division, which has a $33 billion backlog and reported strong earnings last week.
However, earlier this month, it missed out on a contract to provide rail cars for one of the world's biggest light rail systems in Montreal, a project led and financed by the Caisse, its largest independent shareholder.
Ontario transit agency Metrolinx also cut its vehicle order from Bombardier following a dispute over Bombardier's ability to fulfill its contract. core challenge (for Bombardier) is improving execution," Sabia said.
The Caisse also has a 2.5 percent stake in the parent.
The Caisse said its net assets totaled C$299 billion ($236 billion) at the end of 2017, up from C$271 billion a year earlier.
The fund has diversified to become one of the world's biggest investors in infrastructure and real estate as well as a major investor in global equity and fixed income markets.
Sabia said it was positioned to take advantage if the prices of assets decline.
"If a correction arises I would see that as a very significant opportunity," he said. "We have the flexibility to move substantial capital from one or two asset classes into others."
Sabia said the Caisse was looking at possible investments in blockchain technologies but dismissed the idea of investing in bitcoin.
"I'm not signed up for lottery tickets. That's what I think bitcoin pretty much is," he said.
($1 = 1.2667 Canadian dollars)