The Canada Pension Plan earned investment income of approximately $2.4 billion for the nine months ended December 31, 2001, producing an estimated 5.8% rate of return. In the third quarter investment income earned by the CPP Investment Board was $1.4 billion, offsetting the $1.4 billion loss incurred in the second quarter.

“The real story is the high volatility of equities in the short term,” said CPP Investment Board president and CEO, John MacNaughton. “Our equity portfolio had a modest gain in the first quarter, followed by a large loss in the second quarter, which was erased by a strong gain in the third quarter. We expect this volatility to continue and the
dollar amounts, both positive and negative, to widen as our assets grow. We remain convinced that equities will produce positive returns over the long term that will more than compensate for this volatility.”

The fixed-income assets had a market value of approximately $38 billion on December 31. For the year-to-date, the fixed income portfolio produced approximately $2.3 billion. The return for the nine months was approximately 5.9%. These assets consist of federal and provincial bonds and an operating cash reserve.

The market value of assets managed by the CPP Investment Board totalled $13.8 billion on December 31, compared with $7.2 billion at fiscal year end on March 31. They now represent 27% of the total assets available to the CPP and consisted of 95% public equities in stock index funds, 3% private equities, and 2% cash being held to finance pending private equity purchases. These assets had a year-to-date investment income of $56 million for a 1.5% rate of return.

The CPP Investment Board’s 1.5% return compared with 0.6% for the benchmark portfolio. Canadian public equities earned 3.7% compared with 2.3% for the Toronto Stock Exchange 300 Composite Index. Foreign equities had a negative 2.6% return versus minus 3.1% for the benchmark.

The CPP Investment Board expects to have more than $130 billion under management within 10 years and currently invests exclusively in equities because of the large fixed-income portfolio owned by the Canada Pension Plan and because it believes equities will produce superior long-term returns for the risks incurred.