A slumping bond market dealt the CPP Investment Board a quarterly investment loss, but workplace contributions boosted the fund by 3.8%, the CPPIB said Friday.

John MacNaughton, president and CEO of the board, blamed the poor investment performance on the falling bond market. But he said the fund was threatened.

The CPPIB is the Crown corporation that invests future retirement funds for the Canada Pension Plan.

The money managed by the fund will not be needed to pay retirement benefits until 2017, according to current projections. Until that time, payouts will be made from the pool of incoming contributions from workers and employers.

MacNaughton pointed out that as the fund increases its equities investments and decreases its fixed-income holdings, as it has been doing over the past five years, quarterly results will become more volatile. For example, the fund had a 0.3% negative return in the quarter ended June 30, but a 5.5% positive return in the April-June period last year.

The fund aims for a 4.5% annual rate of return, half a percentage point higher than the recommendation from the CPP’s chief actuary.

In the most recent fiscal year, the fund had a return of 17.6%, which followed a negative return of 1.5% the previous year.

During the first quarter of the CPP Investment Board’s fiscal 2005, which began in April, the fixed-income portion of the fund, which accounts for 51.1% of the portfolio, dropped by $494 million or 1.3%, while the equity and real estate portion gained $267 million or 0.8%. The net loss was $227 million.

The fund’s value grew to $73.2 billion on June 30 from $70.5 billion on March 31 and $61.6 billion on June 30 of last year.

It will balloon over the next three years as cash and bonds held by the Finance Department are transferred to the CPP Investment Board.

Effective Sept. 1, it will also assume primary responsibility — currently held by the federal Finance Department — for ensuring that the CPP has enough money to pay its expenses and benefits.