The Canada Pension Plan Fund today reported a 0.29% loss on its investments during the year ended March 31.
The fund totalled $122.7 billion at the close of the fiscal year, up by $6.1 billion from a year earlier thanks to $6.5 billion in worker and employer CPP contributions not needed to pay current benefits.
The negative investment return amounted to $303 million.
“While a negative rate of return is never encouraging, our fiscal 2008 result was well within our long-term risk and return parameters and reflected the challenging capital markets conditions that prevailed during much of the year, particularly during our final quarter of January to March 2008,” CPP Investment Board president David Denison stated in releasing the results Thursday.
“In the context of our multi-generational mandate, the CPP Fund remains on course to help ensure the sustainability of the CPP.”
The slight negative return outperformed the loss of 2.7% in the investment benchmarks the CPP Investment Board uses to assess its relative performance.
“Over the last two fiscal years the CPP Investment Board has generated approximately $5.3 billion in additional investment returns over and above our market-based benchmark to help sustain future pensions for 17 million Canadians,” stated Denison.
During the past year, active investments in private equity contributed $2.2 billion of added value, and real estate and infrastructure added $700 million.
Meanwhile, “given that global developed equity markets were down 12.8% over that period, our almost 52% weighting of public equity holdings was certainly caught in that downdraft,” Denison added.
“However the CPP Fund avoided the credit-related problems that affected many financial institutions and investors during the year. At the time the credit crisis began to materialize in August 2007, the fund had no exposure to subprime mortgages or other investments subject to credit-related repricing.”
The CPP Investment Board said its four-year annualized investment rate of return was 9.0%, “well above the return required to sustain the Canada Pension Plan at its current contribution rate.” The fund’s investments earned 12.9% in fiscal 2007, 15.5% in 2006 and 8.5% in 2005.
Results in the latest year were reduced by $1.4 billion or 1.1% because of the strength of the Canadian dollar.
At fiscal year-end, Canadian assets totalled $65.1 billion or 53% of the portfolio, with the remaining $57.7 billion invested outside Canada.