Equities boost CPP Fund performance in fiscal Q2

“Equities advanced internationally ‎during the quarter moderated by negative Canadian fixed income and foreign currency returns,” says Mark Machin, president and CEO, CPPIB, in a statement. “Our broadly diversified investment portfolio continues to generate strong long-term performance results for the Canada Pension Plan and its contributors and beneficiaries.”

Currently, the fund’s portfolio is about 39.8% invested in public equities (including 3.2% in Canadian equities), 25.8% in government bonds, and 18.6% in private equity, with the rest in real assets, such as real estate and infrastructure. These investments are partly offset by the funds own debt issuance, cash, and absolute return strategies.

The fund is impacted by foreign exchange movements, as it generally doesn’t hedge its foreign currency exposure, CPPIB says. Through the first six months, the Canadian dollar was up by 6.6% against the U.S. dollar, which hurt the fund’s returns during the period. CPPIB says it doesn’t expect currency moves to impact the fund’s returns over the long term.

In terms of longer-run returns, CPPIB reports that the fund’sportfolio has achieved 10-year and five-year net nominal returns of 6.9% and 11.8%, respectively.

The fund’s net assets rose by $1.7 billion in the quarter to $328.2 billion. The asset gain was driven by $2.3 billion in net income, minus $0.6 billion in net CPP cash outflows.

For the first six months of the fiscal year, the fund’s assets are up by $11.5 billion. The CPP Fund typically receives more contributions during the first part of the calendar year, which is partially offset by benefit payments exceeding contributions in the final months, CPPIB explains. On an annual basis, contributions continue to exceed outflows.

CPPIB is pushing to have more women on corporate boards because diversity makes for better business decisions, CPPIB chief executive Mark Machin said Friday.

“This is a high priority for us,” Machin said in an interview with the Canadian Press after Canada Pension Plan Investment Board released its second-quarter financial report.

“We think that diversity leads to better decision-making and I think there’s a growing body of academic and practical evidence that leads to that (conclusion).”

As a result, CPPIB voted 34 times this year against specific directors who chaired board’s nomination committees that failed to include women as candidates.

Although none of the 34 targeted directors were defeated, Machin said that CPPIB believes it has a responsibility to take a leadership role and “would encourage other people to do the same.”

The CPPIB, itself, has an equal number of male and female directors on its 12-member board, which is chaired by Heather Munroe-Blum, a former president of McGill University.

Machin said he thinks there’s broad support in Canada for gender-parity but acknowledged that it can take a long time to change a board’s makeup for various reasons, including the desire for stability and the right set of skills among directors.

“But when you actually push on it, I find that some of those can melt away,” Machin said.

With files from the Canadian Press