The Canada Pension Plan Investment Board reported a negative return on its equity assets for the fiscal year ended March 31. Despite the loss, it says it remains confident equities will produce attractive investment returns over the long term.

The CPP Investment Board registered a loss of $852 million for the year on its equity assets, of which $788 million occurred in the fourth quarter. The fixed-income assets owned by the Canada Pension Plan earned approximately $3.8 billion in fiscal 2001.

The return on the equity assets was a negative 9.4% in fiscal 2001, compared with a positive 40.1% return in fiscal 2000. Over the past two years the CPP Investment Board has earned an annualized return of nearly 15%. The estimated return on the consolidated assets available to the Canada Pension Plan was 7% for fiscal 2001.

At year end, 70% of equity assets were Canadian and 30% foreign, compared with 82% and 18% respectively a year earlier.

The market value of assets held by the CPP Investment Board totaled $7.2 billion at fiscal year end, compared with $2.4 billion a year earlier. These assets, which are invested exclusively in equities, represent approximately 14% of the consolidated assets of the Canada Pension Plan. It has another $42 billion in fixed-income.

“Our fiscal 2001 rate of return compared favourably with declines in the markets in which we invest, recognizing that in our third and fourth quarters we witnessed the worst six-month stock market declines since 1974,” commented John MacNaughton, president and CEO.

“We are a patient investor committed to creating long-term risk-adjusted net value added. We are not deterred by the severity of the recent market downturn that undermined our short-term results.”

MacNaughton suggested that if the CPP Investment Board hadn’t been allowed to cut its exposure to Nortel Networks back in August, it would have lost another 8%, or approximately $535 million in lower asset values.

MacNaughton noted that corrections followed by recoveries are the natural behaviour of equity markets, with five major corrections in the past 30 years including last year. “Few investors rejoice at the sight of falling stock prices. However, we are in the fortunate position of being able to put to work at more advantageous prices the substantial cash flows that come to the CPP Investment Board each month. High cash inflows allow us to dollar cost average by buying equities at lower prices, putting us in a stronger position to benefit when markets recover.”