CPP Investment Board

CPP Investment Board

August 11, 2011 09:00 ET

CPP Fund Ends Fiscal First Quarter at $153.2 Billion

TORONTO, ONTARIO--(Marketwire - Aug. 11, 2011) - The CPP Fund ended the first quarter of fiscal 2012 on June 30, 2011 with net assets of $153.2 billion, an increase of $5.0 billion from the previous quarter ended March 31, 2011.

The increase in net assets this quarter resulted from $1.3 billion of investment income, generated primarily from private assets in the portfolio, and $3.8 billion in excess CPP contributions. The investment income for the quarter represents a 0.9% return.

"Results for the quarter demonstrate our long-term global investment strategy in action, including initiatives to further enhance the CPP Fund's holdings in private market investments," said David Denison, President and CEO, Canada Pension Plan Investment Board. "While major equity indices were down this quarter, the Fund's private equity holdings and real estate portfolio helped deliver positive results overall."

Five and 10-Year Returns

Given the Fund's multi-generational investment horizon, CPPIB is focused on delivering results over the long term. For the five-year period ended June 30, 2011, the CPP Fund has generated an annualized investment rate of return of 4.0%, or $24.7 billion of investment income. For the 10-year period ended June 30, 2011, the Fund has generated $53.0 billion in investment income, reflecting an annualized rate of return of 6.0%.

Long-term Sustainability

The Chief Actuary of Canada conducts a financial review of the Canada Pension Plan every three years. In the latest triennial review completed in November 2010, the Chief Actuary reaffirmed that the CPP remains sustainable at the current contribution rate of 9.9% throughout the 75-year period of his report. The report also indicates that CPP contributions are expected to exceed annual benefits paid until 2021, providing a 10-year period before a portion of the investment income from the CPPIB will be needed to help pay pensions.

Investment Portfolio Update

CPPIB announced a broad range of global investments during the quarter, including:
  • $339 million equity investment for a 36.9% interest in Mayflower partnership, consisting of a portfolio of 13 regional malls in the New England area of the U.S.;
  • $371 million equity investment for a 50% interest in CentrO Oberhausen, a major shopping and leisure centre located near Dusseldorf, Germany;
  • $470 million equity investment to acquire a 50% stake in Northland Shopping Centre, a super-regional mall in Melbourne, Australia;
  • $285 million gross investment for a 50% interest in Hong Kong Interlink, a high quality industrial facility in the heart of Hong Kong's logistics hub. This is CPPIB's first direct investment in Hong Kong;
  • An announced offer to acquire a 24.1% interest in Gassled, a gas transport infrastructure on the Norwegian Continental Shelf, alongside Allianz Capital Partners and ADIA. CPPIB's equity commitment is $738 million;
  • $100 million investment in a newly formed oil and gas platform focused on the Western Canadian Sedimentary Basin; and
  • The acquisition of Skype by Microsoft, as announced in May 2011. When completed, the transaction will crystallize a substantial gain on CPPIB's initial investment of $329 million.
CPPIB also announced several significant investments following quarter end:
  • CPPIB, Apax Partners and PSP Investments entered into a definitive agreement to acquire Kinetic Concepts, Inc. (KCI) for $68.50 per common share in cash. The transaction is valued at $6.0 billion, including KCI's outstanding debt. KCI is a U.S.-based medical device company focused on the design, manufacture, marketing and service of therapies and products for the wound care, tissue regeneration and therapeutic support system markets.
  • Formed a joint venture partnership with U.K.-based Grosvenor Fund Management to invest in value-added office opportunities in London's West End and Midtown areas. CPPIB will invest $292 million in this venture.
  • Expanded CPPIB's U.S. real estate portfolio with eight key transactions including its first direct entry into the U.S. multifamily sector with over $289 million combined equity investment in assets in the Boston, Washington, DC, Los Angeles, San Jose and Seattle areas. This expansion also includes the acquisitions of prime office properties in Washington, DC and Manhattan.
Asset Mix
  • Equities represented 51.8% of the investment portfolio or $79.4 billion. That amount consisted of 36.1% public equities valued at $55.3 billion and 15.7% private equities valued at $24.1 billion.

  • Fixed income, which includes bonds, money market securities, other debt and debt financing liabilities, represented 31.1% or $47.7 billion.

  • Inflation-sensitive assets represented 17.1% or $26.2 billion. Of those assets,

    • 8.2% consisted of real estate valued at $12.6 billion;

    • 6.2% was infrastructure assets valued at $9.5 billion; and

    • 2.7% was inflation-linked bonds valued at $4.1 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 June 30, 2011, the CPP Fund totaled $153.2 billion. For more information about the CPP Investment Board, please visit www.cppib.ca.

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