Canada Pension Plan fund tops $200-billion for first time

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The Canada Pension Plan fund has topped the $200-billion mark for the first time, pushed higher by stock market returns in its last fiscal quarter.

The Canada Pension Plan Investment Board said Friday it earned a return of 5.9 per cent in the quarter ended Dec. 31, which is the fund's fiscal third quarter, pushing total assets under management to $201.5-billion. It's an increase of $8.7-billion from $192.8-billion at the end of September.

CPPIB chief executive officer Mark Wiseman said the fund had one of its best quarters ever, but said he prefers to focus on longer-term returns.

"The bottom line is that everything did well -- it's one of those quarters," he said in an interview.

The fund said the 5.9-per-cent return added $11.1-billion in new income after operating costs. But it also paid out $2.4-billion toward benefits, leaving a net gain of $8.7-billion.

For the first nine months of the year, the fund earned returns of 8.9 per cent, boosting assets by $18.2-billion from $183.3-billion last March 31.

Mr. Wiseman said the gains in the past quarter are due to "the exceptional performance of public equities" in the fund's portfolio, but said all other asset groups also performance strongly.

"You're going to have quarters like this one where everything works -- our private investments did well, our real estate investments did well, and obviously the public markets did well," he said.

"We look at that as further proof of the importance of having a highly diversified portfolio. You're going to have quarters when everything does well, and quarters when everything doesn't do well, but on average some things will do well and some won't and we'll produce a long-term, high-quality, risk-adjusted return."

CPPIB invests about half its holdings in equities, with 32 per cent in public stock market holdings and 18 per cent in private equity, which typically means taking ownership stakes in private companies. A further 33 per cent of its holdings are in fixed income securities such as bonds, and the remaining 17 per cent is in real estate and infrastructure.

The fund's 5.9-per-cent return in the quarter ended Dec. 31 was in line with other Canadian pension plans, which earned average returns of 6.1 per cent in the final quarter last year, according to data from RBC Investor & Treasury Services.

Mr. Wiseman said the fund has an investment horizon that "extends over multiple generations" so is more focused on long-term growth than returns in a single quarter.

"That's what we're focused on -- the 25 years, not the 90 days," he said.

The Chief Actuary of Canada has calculated the CPP is sustainable at its current contribution rate for the next 75 years as long as it earns an average annual 4-per-cent real rate of return after inflation.

The fund says its 10-year annual rate of return after inflation is currently 4.9 per cent, so above the required threshold.

Also Friday, Mr. Wiseman said he is happy about news Thursday that the Toronto Stock Exchange will require all its listed companies to develop so-called majority voting policies, which require directors to tender their resignations if they fail to win majority support in annual board elections.

Shareholders such as CPPIB have advocated the change for years, arguing the current system is undemocratic because shareholders can only vote for a director, or withhold their votes so they are not counted, but cannot vote against anyone. It means directors can be elected with even a single vote.

"It's about shareholders having a right to elect directors, and it's simply a question of fairness in terms of shareholders being able to properly exercise their rights in terms of who goes on the boards of directors of companies they own," Mr. Wiseman said. "This is very positive news in our view."