Canada Pension Plan Returns 5.6% in First Quarter

The investment portfolio of the Canada Pension Plan Investment Board (CPPIB), also known as CPP Investments, returned a robust 5.6% net of costs during its first quarter of fiscal 2021 ending June 30, raising the fund’s total asset value to C$434.4 billion ($327.93 billion) from C$409.6 billion at the end of March. The fund also reported earning five- and 10-year annualized net nominal returns of 8.9% and 10.7%, respectively.

The fund said its active management strategy and resulting diversified investment portfolios have shown “resiliency amid the unprecedented challenges raised by the global COVID-19 pandemic environment.”

The C$24.8 billion quarterly increase in net assets was comprised of C$22.9 billion in net income after all CPPIB costs and C$1.9 billion in net Canada Pension Plan (CPP) contributions.

“While global financial markets experienced a strong rebound from March, significant uncertainty in health, social, and economic conditions persists,” Mark Machin, president and CEO of CPPIB, said in a statement. “Amid this environment, CPP Investments delivered solid performance, while our investment teams were active in creating long-term value across our diversified programs.”

The fund said the global public equity markets’ return to positive performance is reflected in its public holdings, but that the strengthening Canadian dollar against most major currencies offset some of those gains, and that inflows from CPP were lower than normal due to initial forecasts of the impact of the COVID-19 pandemic on employment.

As of the end of June, the portfolio’s three largest asset allocations were to public equities (31.2%), private equities (24.3%), and government bonds (22.6%).

Every three years, Canada’s Office of the Chief Actuary conducts an independent review of CPP’s sustainability over the next 75 years. In its most recent review, the chief actuary reaffirmed that, as of the end of 2018, the fund remains sustainable over the 75-year projection period at the current legislated contribution rates.

The chief actuary’s projections are based on the assumption that the fund’s investments will earn an average annual rate of return of 3.95% above the rate of Canadian consumer price inflation, after all costs over the 75 years following 2018.