Canada Pension Plan Investment Board (CPPIB) delivered a 0.8-per-cent loss during the first quarter of its fiscal year, which started April 1, driven by negative returns on both public and private investments.
Because it is only the first quarter, CPPIB does not provide detailed reporting on each of its divisions. In a release, the fund attributed the small loss to the declining values of fixed income assets – bond prices tend to fall when rates rise – and foreign exchange losses from a stronger Canadian dollar relative to the U.S. dollar.
Despite the small loss, CPPIB’s total assets grew over the quarter to $575-billion, up from $570-billion at the end of the fiscal year, because Canadians are currently contributing more to the fund than the amount being drawn from its reserves – though that is expected to reverse as more Baby Boomers retire. The Canadian Pension Plan is the primary national retirement program for working Canadians, and CPPIB has managed the plan’s money since 1999.
Although U.S. equity markets have delivered large returns so far this year, gains from other stock markets around the world this year are much more muted. Private assets have also struggled after years of scorching returns, and there are concerns this sector will see write downs if interest rates remain high.
Private assets include real estate, infrastructure and private credit, and commercial real estate in particular is facing intense scrutiny. The world’s most sophisticated private real estate investors, including Canadian pension plans, say scores of properties they own are worth hundreds of millions of dollars each and have held most of their value. However, investors have been dumping shares of publicly-traded real estate investment trusts (REITs), particularly those that own skyscrapers, because they don’t think such lofty values still make sense
Over the past decade CPPIB has reported an annualized net return of 9.8 per cent, though its recent performance is more subdued. In its last fiscal year the fund reported a 1.3-per-cent return, with gains from private investments helping to offset weak performance from public stocks and bonds.
Tim Kiladze