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The Canada Pension Plan Investment Board eked out a gain of 0.2 per cent in a fiscal second quarter that was tough for investors, adding $1-billion to the fund’s assets in spite of broad weakness in public and private equities as well as fixed income markets.

CPPIB’s investment returns outperformed The S&P Global LargeMidCap index, a measure of stocks CPPIB uses as 85 per cent of its benchmark reference portfolio, which fell 1.46 per cent in the quarter in Canadian-dollar terms.

But CPPIB narrowly trailed the performance of Canadian defined-benefit pension plans in the quarter, in which assets were up 0.5 per cent, according to Royal Bank of Canada’s RBC I&TS All Plan Universe. In the first nine months of the year, those pension plans have lost 13.7 per cent.

Gains in U.S. dollar-denominated investments, which were boosted by foreign exchange rates, and positive returns from energy and infrastructure investments helped keep returns positive after CPPIB lost $23-billion in the previous fiscal quarter – a period when many rival investors performed much worse. In total, over the first six months of the fiscal year, CPPIB is down about 4 per cent or $10-billion.

As of Sept. 30, CPPIB had $529-billion of assets, up 1 per cent from $523-billion in the previous quarter, as $5-billion in contributions from the Canada Pension Plan added to modest investment gains.

In spite of quarterly headwinds, CPPIB emphasizes its longer-term returns, and its annualized net return over 10 years is 10.1 per cent. Over five years, the net return is 8.5 per cent.

“Our portfolio remains resilient despite inflationary pressures, increases in central bank rates and the continued impact of the war in Ukraine, which resulted in the continued decline in global financial markets during the quarter,” chief executive officer John Graham said in a prepared statement.

With public markets in turmoil, and bond markets in particular on track for their worst annual performance on record, CPPIB’s exposure to private assets continued to act as a buffer preventing steeper losses. Valuations of private assets reset more slowly, helping investors like CPPIB outperform when markets are falling, though they are more slow to reap the benefits when public markets boom.

The federal government created CPPIB in 1999 to manage the Canada Pension Plan’s money, and over time the investment manager embraced active management, adding private equity, infrastructure, real estate and other specialized investments to its portfolio of stocks and bonds.

CPPIB’s second-quarter results also benefitted from gains by external investment managers in fixed income, currencies and commodities.

With a report from David Milstead.

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