The Canada Pension Plan (CPP) Fund beat its benchmark in fiscal 2019, despite trailing its five- and 10-year marks, the CPP Investment Board (CPPIB) reports.
The CPP Fund finished its fiscal 2019 (ending March 31) with $392.0 billion in assets, up by $35.9 billion over the year. The gain in assets is comprised of $32.0 billion in net income and $3.9 billion in contributions.
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The fund’s net return of 8.9% for 2019 outperformed its benchmark portfolio’s return of 6.6% by 230 basis points.
Yet, the 2019 return lags the fund’s 10-year annualized nominal return of 11.1% and its five-year return of 10.9%.
“CPPIB continues to deliver strong absolute and relative returns, and our robust 10-year performance demonstrates our long-term contribution to the sustainability of the CPP,” said Mark Machin, president & CEO of the CPPIB.
Before expenses, the fund returned 9.3% in fiscal 2019.
On the cost side, the fund paid $1.6 billion in investment management fees to external managers during the year, along with $1.2 billion in operating expenses, and $477 million in transaction costs.
The fund’s private equity portfolio was a strong source of returns in 2019, with its foreign holdings returning 18.0% and emerging markets adding 11.8%. Canadian private equity returns trailed at 5.7%.
Public equity markets also helped drive the fund’s gains in 2019, with Canadian equities adding 7.9% and foreign equities returning 7.5% for the year.
Its infrastructure assets also returned 14.0% for the year, while real estate gained 6.4% and bond returns were in the mid-single digits.
“The role of diversification came through clearly this year, and we were encouraged to see nearly all investment departments contributed positively to our results,” Machin said.
“CPPIB’s investment teams also took advantage of our international reach and competitive strengths to pursue select transactions as well as explore new areas of growth,” he added.
The CPPIB reports that over the past five years, it has generated $152.0 billion in cumulative net income for the fund. And, since it was launched in 1999, it has produced $247.6 billion in net income.
Increased CPP contributions are being phased in over the next seven years, starting last January. The CPPIB reports that the additional CPP account had $0.4 billion in net assets at the end of its first quarter.
“Beginning to accept, invest and manage additional CPP contribution amounts in January marked a pivotal moment in CPPIB’s journey, and was the culmination of more than a year of preparations,” Machin noted.