The investment portfolio for the Canada Pension Plan Investment Board (CPPIB) returned 5% net of fees for the second quarter of its fiscal year 2021 ending Sept. 30, raising its asset value to C$456.7 billion (US$348.6 billion) from C$434.4 billion at the end of the previous quarter.
It is the second straight strong quarter for the fund, which returned 5.6% during the first quarter of the fiscal year.
Of the C$22.3 billion increase in net assets for the quarter, C$21.6 billion came from net income after all CPPIB costs, and C$700 million was from net Canada Pension Plan contributions.
For the first half of the fiscal year, the fund returned 10.8% net of all CPPIB costs, and gained C$47.1 billion in asset value, which consisted of C$44.5 billion in net income and C$2.6 billion in contributions. The fund also reported five- and 10-year annualized net nominal returns of 9.6% and 10.5%, respectively.
“CPP Investments’ diversified fund performed well this quarter, generating strong returns,” Mark Machin, president and CEO of CPPIB, said in a statement. “However, we continue to be cautious about the months ahead given the highly uncertain economic fallout of COVID-19 and its effect on markets.”
Machin added that all the fund’s investment departments generated positive returns during the quarter.
The portfolio’s growth was mainly attributed to the continued recovery of global public equity markets during the first two months of the quarter, which were evident from gains for its public and private holdings. However, these gains were somewhat offset by the stock markets declining in September over concerns of new COVID-19 lockdown measures and uncertainty related to monetary stimulus.
As of Sept. 30, the portfolio’s asset allocation was 31.5% in public equities (18.4% foreign, 11.6% emerging markets, 1.5% Canadian), 24.6% in private equities (20.8% foreign, 3.5% emerging markets, 0.3% Canadian), 21.3% in government bonds (16.3% marketable, 5% non-marketable), 12.1% in credit, 9.5% in real estate, 8.2% in infrastructure, 1.8% in energy and resources, and 2% in power and renewables. A negative balance of 11% represents the net amount of financing through derivatives and repurchase agreements, and the net position from absolute return strategies.
The Canadian pension giant also named Frank Ieraci as senior managing director and global head of active equities, and appointed him to be a member of the senior management team, effectively immediately.
Ieraci will lead the active equities department, which invests in public and soon-to be public companies worldwide, as well as securities focused on long-horizon structural changes that can include earlier-stage private companies. The department also includes CPPIB’s sustainable investing group.
He was previously CPPIB’s managing director, head of research and portfolio strategy, and was responsible for delivering alpha through active security selection. He also oversaw the portfolio strategy for active equities, including managing portfolio design and construction.
“Frank is well positioned to take on this senior leadership role, with his extensive understanding of the organization and its investment strategy gained from more than a decade with the fund as well as his considerable investing experience,” said Machin. “Under Frank’s leadership, the active equities department will continue to help advance our long-term investment strategy and champion data-driven research and advanced analytics to improve long-term performance.”