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John Graham, the CEO of the Canada Pension Plan Investment Board, in Toronto, on March 22.Fred Lum/the Globe and Mail

Canada Pension Plan Investment Board has reported a 3.8-per-cent return for the quarter ended Sept. 30, helping it post the best long-term return in its history.

CPPIB’s annualized return for the past 10 years, net of its investment costs, was 11.6 per cent, the national pension fund manager said Friday. At no other time has the 10-year performance figure been higher, it said.

The latest quarterly return outpaced the S&P Global LargeMidCap Index’s Canadian-dollar return of 0.9 per cent in the quarter. When CPPIB releases annual results, it uses that stock index for 85 per cent of its “reference portfolio,” a comparison to passive investing that demonstrates how much value it has added through its investing efforts. (Canadian bonds, as measured by the FTSE Canada All Government Bond Index, make up the rest.)

CPPIB’s reference portfolio had a return of roughly 0.6 per cent in the quarter, The Globe and Mail calculates.

CPPIB closed the quarter with assets of $541.5-billion, compared with $519.6-billion at the end of the previous quarter. The $21.9-billion increase consisted of $19.8-billion in net income after costs and $2.1-billion in net new Canada Pension Plan contributions.

The Canada Pension Plan, founded in 1966, is the primary national retirement program for working Canadians. The government created CPPIB in 1999 to professionally manage the plan’s money. Over time, CPPIB has embraced active management and its blend of stocks, bonds, real estate, infrastructure, private equity and other specialized investments has outperformed public markets and its reference portfolio.

In the early days of the COVID-19 pandemic, when global markets tumbled, the CPPIB asset mix blunted the pain, and the pension fund manager lost much less money than an ordinary investor in the stock market. However, CPPIB often trails when public stock markets rise rapidly, as they did in several recent quarters when investors shook off their pandemic fears.

While CPPIB reports quarterly, it points to its multigenerational mandate and likes to emphasize the long-term returns, which made Friday’s announcement particularly satisfying. CPPIB previously posted 10-year returns of 11.1 per cent in the quarters ended March 31, 2019 and the quarter ended in June of this year.

CPPIB does not release quarterly investment returns for each investment department, but offered general comments, saying there was an increase in the value of all private-equity programs, real assets and credit investments. Its stock market portfolios were “flat,” it said.

A rebound in the U.S. dollar against the Canadian dollar boosted returns. While CPPIB reports its results in Canadian dollars, it holds just 16 per cent of its assets in Canada as of Sept. 30. (When the loonie rises, the Canadian-dollar return of foreign investments is smaller.) CPPIB has 35.2 per cent of its assets in the United States and 24.1 per cent of its assets in Asia, with the rest elsewhere in the world.

Just over half the CPPIB portfolio as of Sept. 30 was in equities, both public and private, with the balance in bonds, debt and real assets such as infrastructure and real estate.

During the quarter, CPPIB appointed Deborah Orida as its first chief sustainability officer, responsible for its approach to environmental, social and governance (ESG) initiatives, with a focus on climate change. She will maintain her role as global head of real assets.

New investments in the latest quarter included:

  • Committing to provide up to US$500-million to Prodigy Finance, a provider of postgraduate student loans for international students attending top schools.
  • Putting US$600-million into the Baring Asia Private Equity Fund VIII, LP, which will focus on control buyouts and minority growth investments.
  • Joining a consortium to buy CeramTec, a maker of high-performance ceramic components. CPPIB’s contribution is about €800-million ($1.15-billion) for a 50-per-cent stake in the company.

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