CPP Investment Board

CPP Investment Board

November 12, 2009 08:30 ET

CPP Fund up $7.2 Billion to $123.8 Billion

TORONTO, ONTARIO--(Marketwire - Nov. 12, 2009) - The CPP Fund ended the second quarter of fiscal 2010 on September 30, 2009 at $123.8 billion compared to $116.6 billion at the end of the first quarter on June 30, 2009. The $7.2 billion increase in assets after operating expenses this quarter consisted of $5.4 billion in investment income, reflecting a 4.6 per cent rate of return, and $1.9 billion in CPP contributions not needed to pay current pension benefits.

For the six-month fiscal year-to-date period, the CPP Fund has increased by $18.3 billion from the $105.5 billion level of the prior fiscal year end of March 31, 2009. This increase in assets after operating expenses is comprised of $5.4 billion in CPP contributions and $13.0 billion in investment income reflecting a 12.0 per cent rate of return. The CPP Fund is now above the previous highest year-end level which was recorded on March 31, 2008.

"The continued strength in the public equity markets has been the major factor in the CPP Fund's increase of over $13 billion of investment income since March 31, 2009," said David Denison, President and CEO, CPP Investment Board. "We are pleased with the Fund's performance this quarter and year to date. At the same time, we remain focused on performance over the long term in line with our long investment horizon."

"In the second quarter we continued to execute our long-term strategy and were able to capitalize on current market conditions by making a number of significant public, private and real estate investments. We expect these investments will be a strong source of investment income over the long term."

In just over 10 years since the CPPIB began investing in April 1999, the Fund has generated $37.2 billion in investment income reflecting an annualized rate of return of 5.2 per cent. Another relevant measure is the four-year annualized investment rate of return through September 30, 2009 which was 2.3 per cent representing $8.3 billion in investment income.

Long-term Sustainability

In July 2009, the Chief Actuary reaffirmed that the CPP is sustainable throughout the 75-year timeframe of his 2007 report; the Chief Actuary will publish a new projection for the CPP in 2010. 

The Chief Actuary of Canada estimates that a 4.2 per cent real rate of return, or approximately 6.2 per cent on a nominal basis, over the span of the 75-year timeframe covered by his 2007 report, is required to sustain the plan at the current contribution rate.

"Although our four-year results are currently below this long-term rate of return, we remain confident the CPP Fund will generate returns in excess of this 4.2 per cent threshold over its long investment horizon," said Mr. Denison.

Asset Mix

At September 30, 2009, equities represented 55.8 per cent of the investment portfolio or $69.2 billion. That amount consisted of 44.6 per cent public equities valued at $55.3 billion and 11.2 per cent private equities valued at $13.9 billion. Fixed income, which includes bonds, money market securities, other debt and debt financing liabilities represented 30.7 per cent or $38.1 billion. Inflation-sensitive assets represented 13.5 per cent or $16.6 billion. Of those assets, 5.6 per cent consisted of real estate valued at $6.9 billion, 4.8 per cent was infrastructure assets valued at $5.9 billion, and 3.1 per cent was inflation-linked bonds valued at $3.8 billion.

CPP Investment Board

The CPP Investment Board is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, the CPP Investment Board invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At September 30, 2009, the CPP Fund totaled $123.8 billion. For more information about the CPP Investment Board, please visit www.cppib.ca.

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