The Canada Pension Plan fund rode a wave of strong gains in foreign stock markets to push its investments up by 10.1 per cent last year and boost its assets to $183-billion.
While bonds and Canadian equity holdings posted slower growth in the year ended March 31, the Canada Pension Plan Investment Board, which manages the CPP’s assets, said its $64-billion portfolio of foreign equities had a stellar year.
Private equity holdings in foreign countries earned 17 per cent for the year, while publicly traded stocks in foreign countries posted 13-per-cent growth.
“That strength in global equity markets was the primary factor driving our solid returns for the year,” said Eric Wetlaufer, CPPIB’s head of public market investments.
The CPPIB’s overall returns were typical for a Canadian pension plan last year. A survey by RBC Investors Services Ltd. found that pension plans earned an average of 9.4 per cent on their investments in 2012, with the giant Caisse de dépôt et placement du Québec earning 9.6 per cent for the year ended Dec. 31, and the Ontario Municipal Employees Retirement System earning 10 per cent.
Over the past year, CPPIB has been threatening the Caisse’s long-held title as Canada’s largest investment fund. It has been difficult to directly compare the two fund managers, however, because they have different year ends, with the Caisse reporting assets of $176-billion as of Dec. 31, and CPPIB disclosing its assets hit $183-billion as of March 31, up from $162-billion a year earlier.
CPPIB said $5.5-billion of its asset growth in the past year came from net CPP contributions by employers and plan members, while $16.2-billion came from investment gains.
Chief executive officer Mark Wiseman told reporters Thursday the fund had “an excellent” year, but said his focus is not on annual returns but on an extremely long-term investment strategy to cover CPPIB’s long funding obligations.
Mr. Wiseman said CPPIB plans to become a public advocate for long-term investing around the globe, saying funds like CPPIB with a “natural multi-generational nature” don’t get enough credit for their beneficial impact on the economies.
By investing in companies for decades and funding innovation and growth, long-term investment funds spur long-term economic development, he said. Pension funds also act as a “shock absorber” during times of down markets when they become big buyers of stocks to maintain their investment weightings, he argued.
“You’re going to see us becoming increasingly vocal in encouraging market participants to adopt a more long-term lens, actually looking at value of stocks and not just looking at a stock as something that goes up and down on an individual day,” he said.
Mr. Wiseman said his proudest achievement in his first year as CEO of the fund is the 87 deals in 11 countries that CPPIB completed last year, including 36 that were worth more than $200-million each.
But André Bourbonnais, head of private investments, said deals appear poised to taper off this year as many more competitors are looking for bargains with plenty of available cash and cheap credit to fund their investments.
“If the environment remains as it is today, we’re going to be very selective,” he said.
The chief actuary of Canada has affirmed that the CPPIB is sustainable over the next 75 years if it earns an average of 4 per cent real annual returns after inflation. CPPIB said Thursday its 10-year real rate of return after inflation is 5.5 per cent, while it’s five-year rate of return is just 2.4 per cent, due mostly to large losses in fiscal 2009 when financial markets collapsed and CPPIB posted a 19-per-cent loss for the year.