The Canada Pension Plan Investment Board (CPPIB), Canada’s largest pension fund, returned 3.1% net of costs for fiscal year 2020 ending March 31, increasing its total assets to C$409.6 billion ($297.12 billion) from C$392.0 billion at the end of fiscal 2019.
The C$17.6 billion increase in net assets consisted of C$12.1 billion in net income after all CPPIB costs and C$5.5 billion in net contributions. The fund had five- and 10-year annualized net nominal returns of 7.7% and 9.9%, respectively.
The fund reported strong gains from global active investment programs during the first three quarters of the fiscal year but said the steep decline in global equity markets during the fourth quarter of the fiscal year had a significant effect on results due to the economic impact associated with the COVID-19 pandemic.
“Our long-term returns of 9.9% over 10 years should give Canadians comfort that, even with periodic shocks, their pensions ultimately draw from decades of steady performance,” Mark Machin, president and CEO of CPPIB, said in a statement. “Despite severe downward pressure in our final quarter, the fund’s 12.6% return on a 2019 calendar-year basis, combined with the relative resilience of our diversified portfolio, helped cushion the impact.”
Marketable government bonds were the top performing asset class for the fund, returning 16.1% during the fiscal year, followed by emerging and foreign private equities, which returned 8% and 6%, respectively. Energy and resources was the worst performing asset class, losing 23.4% for the fiscal year, followed by Canadian and emerging public equities, which lost 12.2% and 9.1%, respectively.
The fund’s largest asset allocation as of the end of March was 28.2% in public equities, which was down from 33.2% at the same time last year. Private equities made up 24.7% of the portfolio, up from 23.7% last year, while government bonds accounted for 23.9% of the portfolio, up from 22% at the end of March 2019. The fund’s allocation to real assets was 23.8%, down slightly from 24% a year ago, while credit investments accounted for 12.4% of the portfolio, up from 9.1% the previous year.
The fund outperformed its reference portfolio, which lost 3.1% during the year. The reference portfolio is a passive portfolio representing public market indexes.
“Years of developing our active investment management strategy allowed us to create widely diversified and resilient investment portfolios,” Machin said. “This is what provided a relative safe harbor for the fund to help weather this time of significant market turmoil.”
CPPIB said that during the five-year period through the end of fiscal 2020, it had contributed C$123.4 billion in cumulative net income to the fund after CPPIB costs, and it has contributed C$259.7 billion on a net basis since CPPIB’s inception in 1999.
“The COVID-19 pandemic poses a massive challenge for health, societies, and economies globally,” Machin said. However, he added that “amid the significant number of concerns many Canadians have today, the sustainability of the fund is one thing they shouldn’t worry about.”