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Mark Wiseman, CEO of the Canada Pension Plan Investment Board.Michelle Siu/The Globe and Mail

The latest returns from Canadian pension funds prove that even the best minds at the behemoths are having trouble navigating these choppy markets.

Recently Canada Pension Plan reported a gain of just 1.1 per cent in its last quarter, and the Caisse de dépôt et placement du Québec barely beat its benchmark indices during the first six months of the year – though it did report a first-half return of 4.5 per cent.

In both cases, the funds tried to persuade investors to focus on the multi-decade potential potential rather than the recent returns. "As we have said repeatedly, in our business it's the long term that counts," the Caisse's Michael Sabia said in a statement.

That echoes Mark Wiseman, the head of CPP's investment board, who told the Globe that "a quarter for us is 25 years, not 90 days."

Such a mentality is certainly important because pension funds have long-dated liabilities. But there's a caveat that we shouldn't forget: regardless of the time period, expert players earn their stripes when the markets are tough. Anybody can make money when everything's hot.

So even if times are tough, with returns varying from asset class to asset class and country to country, there certainly are still ways to make money. Just look at the U.S. investment banks for proof. Despite soaring bond yields, last month JPMorgan reported fixed-income revenues that were up 17 per cent from the prior year, while Citigroup's own fixed-income unit saw earnings pop 18 per cent from 2012.

Yet fixed-income markets have been mostly bad news for the pension funds. The Caisse breaks its portfolio into three components – fixed-income, inflation sensitive investments such as real estate, and equities – and fixed-income is the only one that lost money during the first quarter. CPP also cited trouble generating returns as yields skyrocketed.

(To be fair, let's remember that banks also make money from facilitating fixed-income trades, whereas pension funds purely invest.)

Because the funds' fixed-income returns are so subdued, the Caisse recently announced plans to shift bond money into assets such as real estate and infrastructure.

"We don't hate fixed-income," chief investment officer Ronald Lescure told Pension & Investments in May. "But fixed income is hating us. At best, we expect over the next 10 years to get 2 per cent to 3 per cent per annum. We must do better."

(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)

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