The pension plan for federal government employees earned a 16.3-per-cent return last year, beating its investment benchmarks and pushing assets under management to almost $94-billion.
The Public Sector Pension Investment Board, which invests pension funds for federal civil servants including the Canadian Forces and the RCMP, said Thursday its assets climbed by $17.6-billion in the year ended March 31 – an increase from $76-billion last year – due to huge stock market returns and strong results in private equity and real estate holdings.
PSP Investments, Canada's fifth-largest pension fund manager, said it earned $1.8-billion in value above its passive benchmark return of 13.9 per cent last year.
"Once again, performance was strong across the board with all investment teams contributing to value added over benchmark returns," said interim chief executive John Valentini.
Mr. Valentini was appointed in June following the resignation of former CEO Gordon Fyfe, who left to head B.C.'s pension fund manager, British Columbia Investment Management Corp.
Mr. Valentini said PSP has outperformed the long-term return target it needs to hit to meet its projected pension obligations.
On a 10-year basis, the fund has earned an average annualized return of 7 per cent, which translates into a return of 5.2 per cent after inflation is taking into consideration. The Chief Actuary of Canada said federal pension plans needed to achieve an average return of 4.3 per cent after inflation over the past decade.
Like many pension funds, PSP's returns in the past year easily topped gains in other recent periods due to steep improvements in stock market returns. The fund's 16.3-per-cent gain in fiscal 2014 exceeded gains of 10.7 per cent in 2013 and 3 per cent in 2012.
The fund said gains from its public market stock portfolio ranged from 6.1 per cent in emerging markets to 38.7 per cent for its small cap equity portfolio. Private equity investments climbed 24 per cent last year, while renewable resource holdings were up 20 per cent and real estate climbed by 12.2 per cent.
The fund said it holds just over half its assets – 53 per cent in public market equities – while fixed income and bond investments total just 17.7 per cent of its assets. The remainder of its holdings are in real estate, private equity, infrastructure, renewable resources and cash.