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The Canada Pension Plan Investment Board managed to stay in the black for its just-completed fiscal year, despite a final quarter that shaved more than $10-billion from the pension’s assets.

Aided by a weak Canadian dollar, CPPIB reported a return of 3.1 per cent for the 12 months ended March 31, closing its books with $409.6-billion in assets. That’s down from $420-billion at the end of 2019, but above the $392-billion at the start of the fiscal year.

CPPIB’s investment portfolio lost 3.7 per cent in the March quarter. That represents minimal damage in the market meltdown from COVID-19 as the assets of many pension plans fell anywhere from 7 per cent to 10 per cent in the first three months of 2020, according to studies from RBC Investor and Treasury Services and Morneau Shepell.

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“While no one was completely immune from COVID-19, I hope this gives some comfort our strategy continues to work,” chief executive Mark Machin said in an interview Tuesday. “Despite one-in-a-100-year volatility and a strong selloff in the [March] quarter, we think this is diversification paying off.”

In light of the pandemic, 14 senior managers including Mr. Machin have had their base salaries frozen for this fiscal year.

CPPIB’s reported investment returns are net of expenses. CPPIB says that its benchmark – a “reference portfolio” of 85-per-cent global stocks and 15-per-cent government bonds – fell 3.1 per cent over the 12 months, including a decline of 4.8 per cent in global equities from April 1, 2019, to the end of this March.

CPPIB compares the postexpense dollars added to the portfolio to what that “passive” reference portfolio would have returned. By this measure, the $12.1-billion added to the fund, compared with the $11.4-billion loss in the reference portfolio, creates a “dollar-value added” gain of $23.1-billion – and allows Mr. Machin to argue that the year just completed was the best in CPPIB’s history of active management.

Nearly 90 per cent of CPPIB’s investments are outside Canada, and the fund was aided by a loonie that declined 5.4 per cent over the course of the fiscal year. Since CPPIB reports its assets in the Canadian dollar, a 1-per-cent decline in the loonie adds roughly 1 per cent to its Canadian-dollar-denominated returns. CPPIB says the overall currency benefit in the fiscal year was $14-billion.

That currency effect helped the plan post a 1.6-per-cent gain in non-Canadian equities, which closed the year at $70.5-billion, about 17 per cent of CPPIB’s assets. (The category doesn’t include stocks in emerging markets, which fell 9.1 per cent on the year.)

CPPIB posted single-digit returns in a number of its classes of private assets. Its non-Canadian private equity investments rose 6 per cent to close the year at $86.4-billion, and emerging market private equity rose 8 per cent to close at $13.4-billion. The emerging-market private equity portfolio outpaced emerging-market stocks by 17 percentage points.

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CPPIB said its real estate portfolio gained 5.1 per cent on the year, closing at $46.5-billion. Infrastructure investments fell 1 per cent to close at $35.1-billion.

These investments – private equity, real estate and infrastructure – don’t trade on exchanges and require more estimates to value. That leads skeptics to question whether the institutional holders who own them are rigorous enough in recording market declines.

Mr. Machin insists CPPIB is using a rigorous valuation process that allows its internal risk-management team the final say over the numbers, as opposed to the investment department managers, uses external advisers and appraisers, and has increased the scrutiny of its numbers by its external auditors at Deloitte LLP.

CPPIB’s energy and resources assets posted the single worst return of any asset group, a free fall of 23.4 per cent over the course of the year, to end at $7.3-billion in assets.

The fund reported 10-year and five-year annualized returns of 9.9 per cent and 7.7 per cent after expenses. Over 10 years, CPPIB says its “dollar-value added” figure is $56.9-billion.

CPPIB board chair Heather Munroe-Blum said Tuesday in an interview that the pension’s senior management team – 14 people in all – had their base salaries frozen for the current year in light of COVID-19.

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Annual salary makes up about 11 per cent of Mr. Machin’s total compensation, and roughly 15 per cent to 20 per cent of compensation for other top-paid CPPIB executives, according to its annual report. CPPIB also has annual cash awards and long-term compensation programs that track the fund’s return over five years before payout.

“When we look at compensation, we do it in a five-year context, not on a quarter-by-quarter or one-year basis, and we also have always our eye on a very long horizon,” Ms. Munroe-Blum said. “At the recommendation of the CEO, with the support of the management team, [they] took a freeze on salaries for this year, but maintained all the other elements of the compensation framework consistent, with the five-year compensation model.”

In fiscal 2020, Mr. Machin had a salary of $625,000, an annual cash award of $1.98-million, and just under $2.8-million in long-term awards that will pay out over time. His total compensation, which also includes gains in a pension and other benefits, was $5.88-million, up from $5.76-million in the previous year.

Five other senior managing directors named in CPPIB’s annual report were paid from $2.8-million to $5.2-million in the past fiscal year, with salaries making up $450,000 to $750,000 of that.

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