As volatile stock markets and slowing economic growth put pressure on Canada's largest pension funds, senior managers are focusing on strategies to bolster investment returns in coming years.
The Canada Pension Plan Investment Board, which is Canada's largest pension fund manager, reported on Friday that it lost 0.1 per cent on its investments in its fiscal first quarter ended June 30 as uneven equity and currency markets pushed down returns.
During that period, CPPIB said its assets continued to climb to $268.6-billion, from $264.6-billion as of March 31, because of new contributions from plan members.
Also Friday, the Caisse de dépôt et placement du Québec reported that it posted an investment return of 5.9 per cent in the first half of 2015, ended June 30. The Caisse, which manages assets for Quebec public-sector insurance and pension plans, did not break out results for the volatile second quarter of the year, so its half-year returns are not directly comparable to CPPIB's results.
Caisse chief executive officer Michael Sabia said the fund has benefited from bull markets fuelled by stimulative monetary policies, but economic conditions are changing and it will be increasingly difficult to continue earning oversized rates of return.
"Continuing to do well will be even more challenging in the months and years to come," he said in a statement. "Against a backdrop of high asset valuations and growing economic and geopolitical risks, we will need to be even more rigorous in choosing our investments.
"We will need to raise our game and to innovate to find the most attractive investment opportunities."
Speaking to reporters, Mr. Sabia added that he does not foresee a "catastrophic recession," but he said central banks have few tools left to stimulate growth, while countries such as China and the United States are not growing fast enough to pull up the rest of the world.
"When we look across the global economy, we don't see any big engines, any big locomotives, capable of accelerating global growth," he said.
CPPIB CEO Mark Wiseman, who also spoke to reporters on Friday, said he believes that the investment climate is starting to turn in his fund's favour because market volatility is creating new opportunities for a fund with CPPIB's size and long-term focus. "Our advantage is our scale, the certainty of our assets and the long time horizon that we employ – and on top of that we have a team that is able to transact in a sophisticated way on a global basis."
Mr. Wiseman said the first quarter "is perhaps a more attractive investment environment than we've seen in the last couple of years for an investor with our characteristics," although that does not represent his view on the economy or the markets over all.
And he said the fund has already proved its strength in weak markets this year. "I think the investments that we've put in the portfolio have been able to deliver the exact results in choppy markets that we'd expect," he said. "For us to be flat in that environment means we've built a resilient portfolio."
The Caisse, Canada's second-largest pension fund manager, said its net assets climbed to $240.8-billion as of June 30, up from $225.9-billion at the end of last year. It said $13.1-billion of the asset increase came from investment returns and $1.8-billion was due to new deposits from plan members.
Also Friday, Mr. Sabia offered a strong defence of struggling Bombardier Inc. in the face of questions from reporters about its commitment to investing in the Quebec company. News reports have suggested that the Caisse did not take a large stake in Bombardier's share offering earlier this year because it was rebuffed after asking for changes to the company's dual-class share structure.
Mr. Sabia said he would not disclose private negotiations the Caisse has had with Bombardier, but he said the company's new CEO, Alain Bellemare, has taken many good steps to restructure Bombardier and put it on a sound financial footing.
He said Mr. Bellemare needs time to let his strategies take hold. "I know that in the world of the markets, everybody wants everything to happen overnight. Well, you don't turn around businesses overnight. It's hard work, and that's what he is doing."