CPP Investment Board

CPP Investment Board

May 20, 2010 14:00 ET

CPP Fund Totals $127.6 Billion at 2010 Fiscal Year-End

TORONTO, ONTARIO--(Marketwire - May 20, 2010) - The CPP Fund ended its fiscal year on March 31, 2010 with net assets of $127.6 billion, an increase of $22.1 billion from the prior year end. The increase in assets essentially put the Fund back to its previous highest level reported on June 30, 2008, prior to the onset of the financial crisis. The Fund rose due to increases of $16.2 billion in investment income and $6.1 billion in CPP contributions, minus operating expenses. The portfolio returned 14.9 per cent for fiscal 2010 compared with a prior year decline of 18.6 per cent. 

"The CPP Fund delivered one of its highest-ever annual returns, driven largely by strong public equity markets," said David Denison, President and CEO, CPP Investment Board.

One of CPPIB's goals for fiscal 2010 was to capitalize on investment opportunities arising in the aftermath of the financial crisis. During the year we were able to put our comparative advantages as an investor to good use, acquiring assets in private equity, real estate, infrastructure and private debt. Our long time horizon, distinct investment approach, available capital and specialized investment expertise allowed us to make significant investments last year that were beyond the reach of many investors.

"We have the benefit of being able to look beyond short-term market cycles, and to deal with volatility better than the majority of market participants," Mr. Denison said. "Unlike many other investors, we did not suffer from capital or liquidity constraints last year. In fact, our experienced investment teams completed a number of significant transactions during the year."

These included the acquisition of Macquarie Communications Infrastructure Group, as well as our partnerships with other investors to acquire IMS Health and Skype, investments which are expected to generate strong returns over the long term. 

Five and 10-year Returns

For the five-year period ending March 31, 2010, the CPP Fund generated an annualized rate of return of 4.0 per cent, or $18.5 billion of cumulative investment income. For the 10-year period, the Fund had an annualized rate of return of 5.5 per cent, or $39.3 billion of cumulative investment income. 

Canada's Chief Actuary has estimated that an annualized 4.2 per cent real rate of return, or approximately a 6.2 per cent equivalent nominal rate over the last 10 years, will be needed to sustain the CPP at its current contribution rate.

This 4.2 per cent real rate of return is an annual average over the 75-year time frame used for the CPP projection, and while returns are expected to vary in individual years, CPPIB is confident it will be able to meet and exceed this rate of return over longer periods of time.

"Our five and 10-year results should be viewed in the context of the performance of major global financial markets over the same period. The past 10 years of investing have taken place during the worst calendar decade of performance for equity markets in the nearly 200 years of recorded stock market history," said Mr. Denison. "If we look back over the span of the last 25 years the CPP Reference Portfolio, which serves as the market-based benchmark for the CPP Fund, substantially outperformed the 4.2 per cent real rate of return on a rolling 10-year basis in all periods except calendar 2008 and 2009. We are confident that with the Fund's current portfolio composition and reasonable levels of capital market returns, we will be able to generate the returns required to sustain the CPP at its current contribution rate over the longer term."

Performance Against Benchmarks

As noted above, CPPIB measures performance against a market-based benchmark, the CPP Reference Portfolio. It seeks to generate value-added returns above this benchmark over the long-term. For purposes of accountability CPPIB looks at performance over rolling four-year periods. 

While absolute returns for fiscal 2010 were strong, value-added returns for the four-year period ended March 31, 2010, underperformed the benchmark. For the four-year period ending March 31, 2010, the annual total portfolio return underperformed the CPP Reference Portfolio by 0.34 per cent. The annual total portfolio return for fiscal 2010 was 5.87 per cent below that of the CPP Reference Portfolio, and offset the value-added performance recorded in each of the previous three years.

"The nature of the Fund's private investments in real estate, infrastructure, private debt and private equity means their value typically lags that of the public market indices that comprise the CPP Reference Portfolio," Mr. Denison said. "It can take additional time for appraised values of private assets to reflect public market levels, particularly in the face of a significant rally such as that experienced in global public equity markets in the past 12 months."

"Private investment returns are expected to play out over the long-term and cannot be captured within just a 12-month snapshot. For example, we believe there is considerable value embedded in our real estate and infrastructure investments that will be realized over time," Mr. Denison added.

Portfolio performance by asset class is included in the table below. A more detailed breakdown of performance by investment department is included in the CPPIB Annual Report for Fiscal 2010, which is available on www.cppib.ca.

Fiscal 2010 Portfolio Performance by Asset Class

CPP FUND RETURNS(1)  
Asset Class Fiscal 2010   Fiscal 2009  
Canadian public equities 43.7 % -32.3 %
Canadian private equities 13.1 % -7.8 %
Public foreign developed market equities 24.7 % -29.7 %
Private foreign developed market equities -9.4 % -17.8 %
Public emerging market equities 45.9 % -32.6 %
Private emerging market equities -4.3 % -13.7 %
Bonds and money market securities 6.1 % 5.4 %
Other debt 63.0 % -30.3 %
Foreign sovereign bonds(2) 2.1 % -  
Public real estate 19.3 % -43.7 %
Private real estate -11.8 % -14.0 %
Infrastructure -6.5 % -5.0 %
Inflation-linked bonds 11.3 % -0.6 %
Total CPP Fund 14.9 % -18.6 %
(1) Investment results by asset class are reported on an unhedged Canadian dollar basis. Results are reported on a time-weighted basis.
(2) New to the CPP Reference Portfolio in fiscal 2010. Results hedged to Canadian dollars.

Asset Mix

Consistent with our investment strategy, we continued to diversify the portfolio by risk/return characteristics and geography during fiscal 2010. At the end of fiscal 2010, the Fund's assets were valued at $127.6 billion, a year-over-year increase of $22.1 billion minus operating expenses of $236 million or 19.8 basis points.

Canadian assets represented 43.0 per cent of the investment portfolio and totaled $54.9 billion. Foreign assets represented 57.0 per cent of the investment portfolio, and totaled $72.8 billion.

  • Equities represented 55.7 per cent of the investment portfolio or $71.2 billion. That amount consisted of 43.2 per cent public equities valued at $55.1 billion and 12.5 per cent private equities valued at $16.1 billion.
  • Fixed income which included bonds, other debt, money market securities and debt financing liabilities represented 30.8 per cent or $39.3 billion.
  • Inflation-sensitive assets represented 13.5 per cent or $17.2 billion. Of those assets:
    • 5.5 per cent consisted of real estate valued at $7.0 billion;
    • 4.6 per cent was infrastructure valued at $5.8 billion; and
    • 3.4 per cent was inflation-linked bonds valued at $4.4 billion.
FOR THE YEAR ENDED
MARCH 31
($ billions) 
    2010   2009   2008   2007   2006  

CHANGE IN NET ASSETS
                       
Income (loss)                        
  Net contributions     6.1   6.6   6.5   5.6   3.6  
  Investment income net of operating expenses     16.0   (23.8 ) (0.4 ) 13.0   13.1  
Increase in net assets     22.1   (17.2 ) 6.1   18.6   16.7  

AS AT MARCH 31
($ billions)
    2010   2009   2008   2007   2006  
INVESTMENT PORTFOLIO (% ) ($ ) ($ ) ($ ) ($ ) ($ )
Equities                        
  Canada 14.5   18.5   15.6   28.9   29.2   29.0  
  Foreign developed markets 36.2   46.2   40.4   47.5   46.1   32.7  
  Emerging markets 5.0   6.5   4.6   0.7   -   -  
Fixed income                        
  Bonds 28.8   36.8   28.4   30.2   29.2   27.2  
  Other debt 2.8   3.5   1.8   1.1   -   -  
  Money market securities 0.2   0.3   (0.8 ) -   0.4   0.6  
  Debt financing liabilities (1.0 ) (1.3 ) -   -   -   -  
Inflation-sensitive assets                        
  Real estate 5.5   7.0   6.9   6.9   5.7   4.2  
  Infrastructure 4.6   5.8   4.6   2.8   2.2   0.3  
  Inflation-linked bonds 3.4   4.4   4.1   4.7   3.8   4.0  
Investment Portfolio(1) 100.0   127.7   105.6   122.8   116.6   98.0  
PERFORMANCE                        
Annual rate of return     14.9 % -18.6 % -0.3 % 12.9 % 15.5 %
(1) Excludes non-investment assets such as premises and equipment and non-investment liabilities.

About 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 March 31, 2010, the CPP Fund totaled $127.6 billion. For more information about the CPP Investment Board, please visit www.cppib.ca.

Contact Information

  • CPP Investment Board
    Linda Sims
    Director, Media Relations
    (416) 868-8695
    lsims@cppib.ca