The Canada Pension Plan fund posted a 14.9-per-cent return in its latest fiscal year, bouncing back from a steep loss in the prior year to put the fund back in the same financial position it was in before the financial crisis in 2008.
The CPP Investment Board (CPPIB) reported Thursday the fund's assets grew by $22.1-billion in fiscal 2010, ended March 31, to $127.6-billion. That's up significantly from $105.6-billion a year earlier after the fund's assets fell by 18.6 per cent when global markets plunged.
It means the fund's assets level is back to the previous reported high level of $127.7-billion reached at June 30, 2008.
Chief executive officer David Denison said the CPPIB was able to take advantage of the aftermath of the financial crisis last year to acquire assets in private equity, real estate and infrastructure at good valuations.
"Unlike many other investors, we did not suffer from capital or liquidity constraints last year," Mr. Denison said in a statement. "In fact, our experience investment teams completed a number of significant transactions during the year."
Despite the improved returns, however, the CPPIB's 10-year annual average return of 5.5 per cent is below the estimated levels needed over the next 75 years to ensure the CPP is sustainable over the long term at its current contribution rate.
Canada's chief actuary has estimated the CPPIB needs to earn at least 4.2 per cent annually after inflation to meet its funding needs. With inflation averaging about two per cent over the past decade, that means annual returns would have had to be about 6.2 per cent to meet required targets.
In an interview Thursday, Mr. Denison said the fund is "fully sustainable" and he is confident the long-term target is still attainable over the 75-year time frame facing the fund.
He noted the CPPIB was created only 10 years ago, and since its inception global equity markets have posted their worst returns of the past 200 years. The fund has still earned returns close to its needed levels of performance.
"If the Canada Pension Plan had started investing assets at the beginning of the 1990s, on a cumulative basis we would be way above the 4.2-per-cent real rate of return on a 20-year basis," he said.
"You have to take these [return]snapshots, but I think there's a high degree of conviction that over the longer period of time the kind of asset mix we have in the fund will earn 4.2 per cent real rate of return - hopefully well above that."
The CPPIB also reported Thursday that Mr. Denison earned total compensation of $2.99-million in fiscal 2010, up 2 per cent from $2.92-million in 2009. The four top executives as a group earned $9.57-million last year, up 12 per cent from $8.52-million last year.
The fund faced criticisms last year for paying bonuses to executives despite posting a 19-per-cent loss for the year.