The Canada Pension Plan Investment Board (CPPIB) reported that the Canada Pension Plan (CPP) returned 8.9% net of all costs for the fiscal year that ended March 31, outperforming its benchmark’s return of 6.6%, and ending the year with net assets of C$392.0 billion ($290.9 billion), compared to C$356.1 billion at the end of fiscal 2018.
The C$35.9 billion increase in assets consisted of C$32.0 billion in net income after all CPPIB costs, and C$3.9 billion in net CPP contributions. The CPPIB invests the funds not needed by the CPP to pay current benefits for 20 million contributors and beneficiaries.
The fund, which includes the combination of both the base CPP and additional CPP accounts, also reported five- and 10-year annualized net nominal returns of 10.7% and 11.1%, respectively.
“CPPIB continues to deliver strong absolute and relative returns, and our robust 10-year performance demonstrates our long-term contribution to the sustainability of the CPP,” Mark Machin, CPPIB’s chief executive officer and president, said in a release. “We have gradually built a diversified, global investment platform and focused on executing our multi-year strategy—these are key drivers of our financial performance and our future success.”
Foreign private equities were the portfolio’s top-performing assets for the portfolio, returning 18.0% for the year, followed by real assets infrastructure, and emerging private equities, which earned 14.0% and 11.8%, respectively, for the year.
Credit investments returned 8.7%, while Canadian and foreign public equities returned 7.9% and 7.5%, respectively. Real estate returned 6.4%, Canadian private equities earned 5.7%, while marketable and non-marketable government bonds returned 5.3% and 4.8%, respectively. The only asset class that didn’t earn positive returns was emerging public equities, which lost 1.7% for the year.
“The role of diversification came through clearly this year, and we were encouraged to see nearly all investment departments contributed positively to our results,” said Machin. “CPPIB’s investment teams also took advantage of our international reach and competitive strengths to pursue select transactions as well as explore new areas of growth.”
The portfolio’s largest asset allocation was public equities, which made up 33.2% of all investments, although this was down from 38.8% for the fiscal year that ended March 31, 2018. Of this amount, 21.1% was allocated to foreign pubic equities, 10.1% to emerging public equities, and 2.0% to Canadian public equities. Real assets made up 23.5% of the portfolio, with 12.9% of that going to real estate. Government bonds comprised 21.6% of the investments, while private foreign equities accounted for 17.3%.
CPPIB said its portfolio management strategy benefits from rising public equity markets, while alternative assets and private investments help moderate the impact of significant market drops. It also said it diversified the portfolio by the return-risk characteristics of various assets and countries during fiscal 2019.