'There was nowhere to hide': CPPIB CEO on investments taking a hit from pandemic
Canada Pension Plan Investment Board returned 3.1 per cent for the fiscal year, its worst showing since the financial crisis, as the selloff in equity markets and energy in February and March hurt the fund.
Net assets were $409.6 billion as of March 31, the fund’s fiscal year-end. That represented growth of $17.6 billion, consisting of of $12.1 billion in net income from investments and $5.5 billion in new contributions, CPPIB said in a statement Tuesday.
The numbers mean Canada’s largest pension fund suffered about $15.8 billion in investment losses in the first three months of 2020. The fund had reported $27.9 billion in investment gains for the nine months ended Dec. 31.
“Despite severe downward pressure in our final quarter, the fund’s 12.6 per cent return on a 2019 calendar-year basis, combined with the relative resilience of our diversified portfolio, helped cushion the impact,” Chief Executive Officer Mark Machin said in the statement.
The fund’s 10-year and five-year annualized net nominal returns were 9.9 per cent and 7.7 per cent, respectively, which “should give Canadians comfort that, even with periodic shocks, their pensions ultimately draw from decades of steady performance,” Machin said.
The fund’s 3.1 per cent investment gain outperformed its benchmark portfolio’s 3.1 per cent loss, which equates to a value-added return of $23.4 billion for the year, after deducting all costs, the fund said.
Losses in Resources
CPPIB is designed to serve contributors and beneficiaries for decades, so long-term results are a more appropriate measure of performance than quarterly or annual cycles, the fund said.
“The COVID-19 pandemic poses a massive challenge for health, societies and economies globally. Amid the significant number of concerns many Canadians have today, the sustainability of the fund is one thing they shouldn’t worry about,” Machin said.
The fund’s holdings of Canadian public equities lost 12.2 per cent for the year and emerging markets stocks dropped 9.1 per cent, while foreign stocks generated a return of 1.6 per cent.
All credit investments returned 0.5 per cent and real estate returned 5.1 per cent, while infrastructure dropped one per cent. Canadian private equity investments lost 5.1 per cent, while foreign PE returned six per cent. Energy and resources lost 23.4 per cent.
Caisse de Depot et Placement du Quebec returned 10.4 per cent in 2019 as stocks and fixed income shielded Canada’s second-largest pension fund manager from a poor performance in real estate. Ontario Teachers’ Pension Plan delivered a 10.4 per cent return last year, lagging its 12.2 per cent benchmark. The failure to beat the hurdle tends to happen when public equities have exceptional returns, Teachers said.
Ontario Municipal Employees Retirement System returned 11.9 per cent on its investments last year, pushing assets to $109 billion. The pension fund cut its stock holdings last year and added to its infrastructure bets.