CPPIB passes Caisse as biggest pension fund manager

Share

The Canada Pension Plan Investment Board has become the country's largest pension fund manager, reporting record assets of $161.6-billion as of March 31 and surpassing Quebec's giant pension manager for the first time.

The CPPIB, which manages the Canada Pension Plan's investment portfolio, said its assets grew by $13.4-billion in fiscal 2012, ended March 31, thanks to a 6.6-per-cent return on its investments and $3.9-billion in new CPP contributions.

The growth makes CPPIB Canada's largest pension fund manager based on publicly disclosed assets under management, surpassing the Caisse de dépôt et placement du Québec, which has long been Canada's largest pension fund manager with $159-billion in assets under management as of Dec. 31.

The Caisse, founded in 1965, does not report financial information on a quarterly basis, however, so its Dec. 31 asset total was likely significantly larger by March 31 and may have still topped CPPIB's March 31 numbers.

CPPIB, created in 1997 to manage the CPP's money, has been growing rapidly as it invests Canadians' pension contributions, but has yet to begin to pay out its gains to fund pensions. The Canada Pension Plan currently takes in enough money in employee contributions to meet its required annual payments, but expects to begin using money from its massive investment portfolio in 2021 when Canada's aging population will begin drawing more from the CPP than it brings in annually.

Despite its rapid growth over the past decade, CPPIB says it is still not a behemoth on a global scale, ranking 17th internationally among national pension and sovereign wealth funds.

The CPPIB said its increase in assets in 2012 included $9.9-billion in gains from investmentsand $3.9-billion in new CPP contributions.

CPPIB chief executive officer David Denison told reporters Thursday the fund is still on track to earn the rates of return it needs to remain sustainable for the next 75 years. The CPPIB needs to earn a "real" rate of return after inflation of 4 per cent annually to meet its payout targets in the future, which currently means average annualized returns of about 6 per cent annually before inflation.

The fund's 10-year annualized rate of return is 6.2 per cent, but its five-year rate of return is just 2.2 per cent after years of recent turmoil in the markets. Mr. Denison said he is confident the fund will earn the average returns it needs over the long term despite recent short-term results.

"We've been able to achieve that [result]notwithstanding that 10-year period includes the latter part of the tech wreck in the early part of the 2000s and the global financial crisis and more recently the euro zone crisis," he said.

Thursday's results are the last to be announced by Mr. Denison, who is retiring as CEO at the end of June. He will be replaced by CPPIB investment head Mark Wiseman, who told reporters Thursday he will continue to oversee a slow shift in the CPPIB's assets into investments outside of Canada and especially in the developing world.

The fund now has 40 per cent of its holdings in Canada and 60 per cent invested around the globe. Mr. Wiseman said emerging countries are expected to account for 59 per cent of global GDP within 20 years, up from 35 per cent today, so the CPPIB has to follow the advice of hockey star Wayne Gretzky and move to where "the puck is going to be, not where it is now."

Mr. Denison said CPPIB continues to increase the proportion of its private equity holdings and reduce its public stock portfolio, where returns are lower and far more volatile. Private assets have climbed to 36.6 per cent of CPPIB's holdings from 31.6 per cent at the end of fiscal 2011.

The fund's private equity holdings in Canada, for example, earned 8.1 per cent last year, while its Canadian public equities lost 10.7 per cent. By contrast, CPPIB's foreign private equity holdings in developed countries gained 12.1 per cent while real estate holdings earned 13 per cent and infrastructure climbed 12.8 per cent.