The total invested assets available to the Canada Pension Plan held their value in the first six months of the current fiscal year, as equities plunged. But the plan’s fixed income portfolio made gains.

On a consolidated basis, the total assets available to the CPP had an estimated 1.4% rate of return in the first half of the fiscal year ended September 30, to produce an investment gain of approximately $200 million.

The fixed-income assets had a market value of approximately $40 billion, and generated an estimated positive return of 3.9%. The equity assets had a negative 8.9% return, or a $1.4 billion loss, in the first half of fiscal 2002.

The equities, primarily in the form of index funds, are managed by the CPP Investment Board and represented 23% of the consolidated assets available to the CPP. The negative 8.9% return on equities compared with a negative 10.1% for the total portfolio benchmark.

Approximately 70% of assets at market value were invested in Canadian equities, which lost 8%, compared with minus 9.4% for the TSE 300. The 30% of assets at market value invested in foreign equities had a negative 11.4% return versus minus 11.8% for the benchmark.

CPP Investment Board president and CEO John MacNaughton said, “The markets anticipated in September the lower corporate earnings that were reported in recent weeks. We will see wide swings in quarterly gains and losses. However, current markets continue to represent favourable buying opportunities for us. First, our annual cash flows are large and we can buy equities at lower prices than they were a year or so ago and lower than they will likely be in a few years time. Second, these large positive cash flows will continue for many years so we have a very long investment horizon.”

MacNaughton explained that it is not possible to predict how equity markets will perform in the short term. Consequently, the CPP Investment Board does not attempt to time the market. “What we do know is that market corrections are always followed by market recoveries.”