Canada Pension Plan reports 1.8% return for quarter

The Canada Pension Plan Investment Board (CPPIB) ended its first quarter of fiscal 2019 on June 30, 2018, with net assets of C$366.6 billion ($277.7 billion), compared to C$356.1 billion ($270.4 billion) at the end of fiscal 2018. The C$10.5 billion ($7.9 billion) increase in assets for the quarter consisted of C$6.6 billion ($5.01 billion) in net income after all CPPIB costs and C$3.9 billion ($2.9 billion) in net Canada Pension Plan contributions. 

The Investment Portfolio achieved 10-year and five-year annualized net nominal returns of 8 percent and 12.3 percent, respectively, and 1.8 percent for the quarter. These returns are net of all CPPIB costs.

As of June 30, real estate made up 12.6 percent, or C$46.2 billion ($35.1 billion), of CPPIB’s Investment Portfolio.

“While performance was solid across our investment departments, our private assets did particularly well. Global equity markets maintained positive performance this quarter, contributing to Fund growth,” says Mark Machin, president and CEO for CPPIB. “While we focus on strong average returns stretching well beyond five and 10 years, solid performance today cushions the Fund for an inevitable future market downturn. We are confident that our investment strategy will continue to serve the Fund through multiple economic cycles.” 

Long-term results are a more appropriate measure of CPPIB’s investment performance than returns in any given quarter or single fiscal year.

CPPIB’s 10-year annualized net nominal rate of return of 8.0 percent, or 6.4 percent on a net real rate of return basis, was above the Chief Actuary’s assumption of an average 3.9 percent return over the 75-year projection period of his report. The real rate of return is reported net of all CPPIB costs to be consistent with the Chief Actuary’s approach.

Every three years, the Office of the Chief Actuary of Canada conducts an independent review of the sustainability of the CPP over the next 75 years. In the most recent triennial review released in September 2016, the Chief Actuary of Canada reaffirmed that, as at December 31, 2015, the CPP remains sustainable at the current contribution rate of 9.9 percent throughout the forward-looking 75-year period covered by the actuarial report. The Chief Actuary’s projections are based on the assumption that the Fund’s prospective real rate of return, which takes into account the impact of inflation, is expected to average 3.9 percent over the 75-year period. 

The Chief Actuary’s report confirmed that the Fund’s performance was ahead of projections for the 2013–2015 period as investment income was 248 percent, or C$70 billion ($53 billion), higher than anticipated.