CPP Investment Board

CPP Investment Board

May 19, 2011 14:00 ET

CPP Fund Totals $148.2 Billion at 2011 Fiscal Year-End

TORONTO, ONTARIO--(Marketwire - May 19, 2011) - The CPP Fund ended its fiscal year on March 31, 2011 with net assets of $148.2 billion, compared to $127.6 billion at the end of fiscal 2010. The $20.6 billion increase in assets after operating expenses marks a new all-time high for the Fund. The Fund increase resulted from $15.5 billion in investment income and $5.4 billion in net CPP contributions. The portfolio returned 11.9% for fiscal 2011, compared to 14.9% in the prior fiscal year.

"Fiscal 2011 was an excellent performance year, with the Fund benefiting from strong results across all asset categories and geographies," said David Denison, President and CEO, CPP Investment Board. "By adhering to our long-term strategy during and following the recent financial crisis, the Fund has benefited from the recovery in the global public equity markets and has generated total investment income of $31.7 billion over the past two fiscal years.

"During fiscal 2011 we were able to take advantage of the deep expertise of our investment teams to make some notable additions to our private equity, infrastructure, real estate and private debt holdings."

Some highlights:

  • Partnering alongside Onex Corporation, we completed the largest global private equity transaction during calendar 2010: the acquisition of Tomkins plc with an equity investment of $1.1 billion. This was the second consecutive year that we were involved in the largest global private equity transaction.
  • On the real estate front, we successfully acquired interests in two prime Manhattan office buildings whose combined value is $1.6 billion, representing an equity investment of $700 million. In London, we acquired a 25% interest for $468 million in Westfield Stratford City, a new 1.9 million square foot retail and entertainment development next to the 2012 London Olympics site. In Australia, we purchased a 42.5% stake for $604 million in the ING Industrial Fund, a portfolio of prime industrial properties.
  • We also completed our largest infrastructure investment to date with two concurrent transactions involving the acquisition of a 40% interest in the 407 Express Toll Route outside Toronto as well as an interest in a toll road in Sydney, Australia. Our total initial investment amounted to $4.1 billion, a portion of which we then syndicated to a group of other institutional investors for a combined interest of approximately 29%.
  • Our Private Debt group has now grown to 22 professionals. Last year we established a team in our London office and have made great strides in expanding the European reach of the program. Since its inception less than three years ago, our Private Debt Group has completed 41 transactions totaling $4.4 billion.

Five and 10-year Returns

Although CPPIB reports on a quarterly and annual basis, longer-term results are more relevant given the multi-generational nature of the CPP itself. For the five-year period ending March 31, 2011, the CPP Fund generated an annualized rate of return of 3.3%, or $20.9 billion of cumulative investment income. For the 10-year period, the Fund had an annualized rate of return of 5.9%, or $51.8 billion of cumulative investment income.

"Our 10-year annualized rate of return has recovered to a level that is consistent with the 4.0% prospective real rate of return that the Chief Actuary has incorporated in his latest report confirming the sustainability of the CPP, even though the sharp equity markets decline experienced in 2008 and 2009 continues to weigh down the five- and 10-year returns," said Mr. Denison. "We remain confident that we have designed the mix of assets within the CPP Fund so that it is well positioned to achieve the 4.0% real rate of return required over the longer term."

Performance Against Benchmarks

CPPIB measures its performance against a market-based benchmark, the CPP Reference Portfolio, representing a passive portfolio of public market investments that can reasonably be expected to generate the long-term returns needed to help sustain the CPP at the current contribution rate. CPPIB's strategy is to invest actively with a view to outperform the passive benchmark.

In fiscal 2011, total portfolio returns outperformed the CPP Reference Portfolio by 2.07 % or $2.7 billion. For the five-year period since the inception of the CPP Reference Portfolio, the cumulative outperformance was 1.80% or $1.7 billion.

"Many of our investment programs such as real estate and infrastructure are very long-term in nature, and we are pleased that the benefits of those programs are materializing as private market valuations start to reflect the economic recovery of the past two years," Mr. Denison said. "The full range of CPPIB's investment programs contributed to the Fund's strong absolute and value-added returns in fiscal 2011 showing the benefit of the broad diversification we have achieved."

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 2011, which is available on www.cppib.ca.

Portfolio Performance by Asset Class

CPP FUND RETURNS1
Asset ClassFiscal 2011Fiscal 2010
Canadian public equities20.3%43.7%
Canadian private equities16.9%13.1%
Public foreign developed market equities9.1%24.7%
Private foreign developed market equities19.4%-9.4%
Public emerging market equities11.2%45.9%
Private emerging market equities17.1%-4.3%
Bonds and money market securities4.7%6.1%
Other debt16.3%63.0%
Foreign sovereign bonds23.0%2.1%
Real estate313.9%-10.1%
Infrastructure13.3%-6.5%
Inflation-linked bonds10.2%11.3%
Total CPP Fund11.9%14.9%
1Investment results by asset class are reported on an unhedged Canadian dollar basis. Results are reported on a time-weighted basis.
2Results hedged to Canadian dollars.
3Real estate returns were previously separated into private and public.

Long-term Sustainability Reaffirmed

The Chief Actuary of Canada conducts a financial review of the Canada Pension Plan every three years. In his 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.

Asset Mix

We continued to diversify the portfolio by risk/return characteristics and geography during fiscal 2011. At the end of fiscal 2011, the Fund's assets were valued at $148.2 billion, a year-over-year increase of $20.6 billion net of operating expenses of $328 million or 24 basis points.

Canadian assets represented 48.3% of the investment portfolio, and totaled $71.7 billion. Foreign assets represented 51.7% of the investment portfolio, and totaled $76.6 billion.

  • Equities represented 53.5% of the investment portfolio or $79.4 billion. That amount consisted of 38.2% public equities valued at $56.7 billion and 15.3% private equities valued at $22.7 billion.
  • Fixed income, which included bonds, other debt, money market securities and debt financing liabilities represented 30.1% or $44.6 billion.
  • Inflation-sensitive assets represented 16.4% or $24.3 billion. Of those assets:
    • 7.3% consisted of real estate valued at $10.9 billion;
    • 6.4% was infrastructure valued at $9.5 billion; and
    • 2.7% was inflation-linked bonds valued at $3.9 billion.
FOR THE YEAR ENDED
MARCH 31
($ billions)
2011
2010
2009
2008
2007

CHANGE IN NET ASSETS
Net contributions5.46.16.66.55.6
Investment income (loss) net of operating expenses15.216.0(23.8)(0.4)13.0
Increase in net assets20.622.1(17.2)6.118.6
AS AT MARCH 31 ($ billions)
2011

2010
2009
2008
2007
INVESTMENT PORTFOLIO(%)($)($)($)($)($)
Equities
Canada14.121.018.515.628.929.2
Foreign developed markets34.350.846.240.447.546.1
Emerging markets5.17.66.54.60.7-
Fixed income
Bonds25.337.635.428.430.229.2
Other debt4.16.13.51.81.1-
Money market securities1.62.31.7(0.8)-0.4
Debt financing liabilities(0.9)(1.4)(1.3)---
Inflation-sensitive assets
Real estate7.310.97.06.96.95.7
Infrastructure6.49.55.84.62.82.2
Inflation-linked bonds2.73.94.44.14.73.8
Investment Portfolio1100.0148.3127.7105.6122.8116.6
PERFORMANCE
Annual rate of return11.9%14.9%-18.6%-0.3%12.9%
1Excludes 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, 2011, the CPP Fund totaled $148.2 billion. For more information about the CPP Investment Board, please visit www.cppib.ca.

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