CPP investments ride market rally

(August 7, 2003) The CPP Investment Board (CPPIB) reported its plan had earned a healthy 5.5% return on pension contributions in the quarter ending June 30, adding $3.1 billion to the pension plan’s coffers. In the previous quarter the board had posted a loss of $1.2 billion.

“While our first-quarter results are encouraging, Canadians should note that what matters isn’t how we perform over any three-month period, but how we perform over the next 10 to 20 years,” said John MacNaughton, president and CEO of the CPPIB.

The gains were made thanks to the strength in both the bond and stock markets, with $1.4 billion coming from the fixed income securities managed by the Department of Finance. The majority of the fund, 62%, is devoted to fixed income, with the remaining 38% managed by the CPPIB.

The CPPIB portfolio earned a return of 8.6% in the quarter, totalling $1.7 billion. The board’s asset allocation consists of 91% in public equities, 6% in private equity and the remaining 3% in cash.

“Our program to build a diversified portfolio is on track,” said MacNaughton. “We are continuing our strategy of investing in a broader range of asset classes that over time will deliver the higher risk adjusted returns needed to help deliver on the CPP pension promise for 16 million Canadians.”

Actuarial projections predict the plan has another 18 years before benefits paid out will surpass contributions to the CPP.

Filed by Steven Lamb, Advisor.ca, slamb@advisor.ca