Canada Pension Plan Investment Board has reported a 3.5-per-cent return for the quarter ended June 30, good enough to add $17.7-billion in assets to the fund but not good enough to outpace global stock markets.
CPPIB’s return, which is net of expenses, trailed the S&P Global LargeMidCap Index’s Canadian-dollar return of 5.4 per cent in the quarter. CPPIB uses that stock index for 85 per cent of its “reference portfolio,” a passive-investing benchmark to demonstrate how much value the national pension manager has added through its investing efforts. (Canadian bonds make up the rest.)
CPPIB reported Friday that it had $519.6-billion in assets as of June 30, the first time it has closed a quarter with assets above the half-trillion-dollar mark. Its 10-year and five-year annualized returns, after costs and unadjusted for inflation, are 11.1 per cent and 11.4 per cent, respectively.
The Canada Pension Plan, founded in 1966, is the primary retirement-security program for working Canadians. The government created CPPIB in 1999 to professionally manage the plan’s money. Over time, CPPIB has embraced active management and has used the passive-investing reference portfolio to communicate how much its work is contributing to Canadians’ retirement plans.
Often, its blend of stocks, bonds, real estate, infrastructure, private equity and other specialized investments tops its passive benchmark. In the early days of the pandemic, when global markets tumbled, the CPPIB asset mix blunted the pain, and the pension fund manager lost much less money than an ordinary investor in the stock market.
However, CPPIB trails when public stock markets rise rapidly, as they did when investors shook off their pandemic fears. In the fiscal year ended March 31, it posted its best-ever annual return – but missed its investment return benchmark by a wide margin, wiping out five years of outperformance.
That continued in the fiscal first quarter ended June 30, albeit to a lesser degree. CPPIB’s reference portfolio had a return of roughly 4.9 per cent in the quarter, The Globe and Mail calculates, compared with CPPIB’s 3.5-per-cent net return.
Because of CPPIB’s long-term obligations, it eschews publishing quarterly benchmark returns. In a May interview, chief executive officer John Graham said: “If we compare our longer-term performance to peers both domestically and internationally … the total returns, from my perspective, have been very strong.”
CPPIB said Friday that its quarterly results were driven by “the ongoing strength in public equity markets, gains across all private equity and real assets programs, and contributions from credit investments.” The pension fund manager only releases department-specific returns on an annual basis.
A strong Canadian dollar offset these gains in the most recent quarter, CPPIB said. It reports results in Canadian dollars, but only 16.6 per cent of its portfolio is invested in Canada. When the loonie rises, the Canadian-dollar return of foreign investments is smaller.
New investments in the quarter included:
- US$150-million in the National Stock Exchange of India
- US$70-million in a loan to U.S. retailer David’s Bridal
- US$40-million in Waymo, a U.S.-based developer of autonomous vehicle technology
- US$120-million for a 1.5-per-cent stake in Kakao Japan Corp., the operator of Piccoma, the leading digital distributor of comics in Japan
- €900-million ($1.3-billion) for an additional stake in GLP Continental Europe Development Partners I, a fund designed to develop modern logistics assets in continental Europe
- $2.1-billion as an additional investment in communications infrastructure provider BAI Communications, in part to support the acquisition of U.S. wireless company Mobilitie.
In a previous announcement, CPPIB said Suyi Kim will become senior managing director and global head of private equity, effective Sept. 15. She will replace Shane Feeney, who left for Toronto-based Northleaf Capital Partners. Ms. Kim was most recently senior managing director and head of Asia Pacific at CPPIB.
CPPIB also said former Sun Life Financial Inc. CEO Dean Connor and former Fortis Inc. CEO Barry Perry will join its board, replacing directors Karen Sheriff and Jo Mark Zurel.
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