CPPIB Gains 3.1% in Fiscal 2020

May 28 00:05 2020 Print This Article

Pete Evans of CBC News reports CPP adds $17 billion to assets now worth more than $409 billion despite the pandemic:The Canada Pension Plan earned a return of 3.1 per cent after expenses during the financial year ended March 31, the board that manages the fund's money reported Tuesday.Net assets for Canada's national pension plan totalled $409.6 billion as of the end of March, up from $392 billion at the end of the previous financial year.The $17.6-billion year-over-year increase included $12.1 billion in net income from its investments. The other $5.5 billion came from contributions of more than 20 million Canadian workers covered by the plan.In the past five years, investment returns have added $123 billion to the fund's assets, the Canada Pension Plan Investment Board said Tuesday.While the plan made money for the year as a whole, the fourth quarter was a challenging one because of COVID-19. The fund said fixed-income assets did well as investors fled for safety, but values of stock-based investments fell."Despite severe downward pressure in our final quarter, the fund's 12.6 per cent return on a 2019 calendar-year basis combined with the relative resilience of our diversified portfolio helped cushion the impact," chief executive officer Mark Machin said."Amid the significant number of concerns many Canadians have today, the sustainability of the fund is one thing they shouldn't worry about. The fund's long-term returns continue to help ensure the security of Canadians' retirement benefits."A three per cent return may not sound impressive, but Michel Leduc, a senior investment executive with the fund, said in an interview that the fund's financial performance in the middle of a serious economic crisis is a testament to its strategy. The CPP measures its own performance against a series of market-based benchmarks, the main one being the Reference Portfolio. That reference portfolio declined by 3.1 per cent in the past year, the same amount that CPP increased by.'Quite resilient'Leduc noted that the Dow Jones Industrial Average lost 23 per cent in the first three months of this year, its worst quarterly performance in its 135-year history.If the CPP were just to have matched the stock market, "the fund would be would be $23 billion smaller today," he said. "You've got to look at in the context of going through an economic shock which we know we're going to go through from time to time…. To preserve $23 billion … I would say to Canadians that their fund is quite resilient and the active management put the fund in that safe harbour."The Chief Actuary of Canada audits the CPP every three years to assess its ability to cover its obligations. At the last review in December 2018, the chief actuary deemed the CPP was on track to meet its obligations for the next 75 years at least, assuming the fund can earn a return of 3.95 per cent above inflation. The CPPIB has achieved a real return of eight per cent, on average, over the past 10 years, and 6.1 per cent over the past five.Buying opportunitiesLeduc said the current downturn could lead to some attractive buying opportunities for CPP, but that doesn't mean the fund is running off on a buying spree without making sure that any investments fit the long-term objectives."We're one of the few institutional investors around the world that can pretty much acquire anything," he said. "We will look at opportunities, very carefully, but it's not the Wild West … we're not going out and buying everything."

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About Article Author

Pension Pulse

Leo Kolivakis is an independent senior economist and pension and investment analyst with years of experience working on the buy and sell-side. He has researched and invested in traditional and alternative asset classes at two of the largest public pension funds in Canada, the Caisse de dépôt et placement du Québec (Caisse) and the Public Sector Pension Investment Board (PSP Investments). He's also consulted the Treasury Board Secretariat of Canada on the governance of the Federal Public Service Pension Plan (2007) and been invited to speak at the Standing Committee on Finance (2009) and the Senate Standing Committee on Banking, Commerce and Trade (2010) to discuss Canada's pension system.

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