Cooling equity markets trimmed the rate of return earned by the Canada Pension Plan in fiscal 2005. The pension plan reported today that it made an 8.5% rate of return for the current year, down from 17.6% the previous year.

The CPP reserve fund showed a $6.3 billion investment gain, off from $10.3 billion in 2004.

Global equity markets performed well in fiscal 2005, but not at the high levels of the previous year, the CPP said in a release.

The pension plan made $4.7 billion — for a return of 11.6% — on its equities and real return assets, down from 31.7% a year earlier.

The CPP’s fixed income assets, including cash and bonds, generated income of $1.6 billion, for a return of 4.6%. Last year, the CPP made $3.1 billion on its fixed income investments.

The total CPP portfolio grew to $81.3 billion in 2005, from $70.5 billion in 2004.

Over the past five years the CPP reserve fund has earned an inflation-adjusted rate of return of 4.48%, which surpasses the 4.1% real rate of return required to sustain the CPP over the long term.

“We are now part way through our diversification program for the reserve fund and the results of the past year reflect its current composition,” said David Denison, the president and CEO of the CPP Investment Board, in a release.

“Going forward, we will be taking steps to more broadly diversify the portfolio beyond the current asset mix by increasing our holdings in real estate, infrastructure and other real return assets,” he said.

As of the end of March, 56.2% of the CPP reserve fund was invested in publicly traded stock, 39% was in fixed income securities, 3.6% was in private equity and 1.2% was in real estate and infrastructure projects.