CPPIB assets near half a trillion dollars at end of fiscal year

A record return over the first full year of the pandemic has put the manager of Canada’s largest retirement fund years ahead of schedule to meet a long-term goal of having half a trillion dollars in assets by 2028.

Canada Pension Plan Investment Board reported Thursday that its funds earned 20.4% net of all costs for its 2021 fiscal year ended March 31, the highest annual return since its inception in 1999.

As of March 31, CPP Investments had $497.2 billion in assets under its management, up from $407.3 billion in fiscal 2020 when it had a below-average return of 3.1% due to the onset of the Covid-19 pandemic.

CPP Investments CEO John Graham, who was previously CPP Investment’s global head of credit investments and replaced Mark Machin in February, said conditions changed rapidly and in the fund’s favour over the past year.

“We’re seven years ahead of schedule for reaching half a trillion dollars,” Graham said in an interview.

CPPIB has a 75-year investment horizon, much longer than most private-sector funds, and it’s designed to ensure the Canada Pension Plan will be able to meet its obligations to retirees for decades to come.

All six of CPPIB’s departments showed positive performance over fiscal 2021, although some gains were offset by foreign exchange losses due to the Canadian dollar’s strength compared with the U.S. dollar.

One of the organization’s recent strategic moves was to combine the two teams that invested separately in conventional and new energy.

Graham said the new sustainable energy group will be headed by Bruce Hogg, who founded CPPIB’s power and renewables group a few years ago, with a member of the conventional energy group in the No. 2 executive position.

The new group’s mandate is to invest in all types of energy assets, including carbon-based fuels such as oil, natural gas and coal, but with the view that “climate change is a real risk that needs to be managed.”

“The best way for us to do it is to (be an) active, engaged owner and invest through this energy transition,” Graham said.

One Canadian example of that investment strategy, he said, is a European joint venture with Calgary-based Enbridge, which is primarily a North American operator of conventional oil and natural gas pipelines.

“We invest with them in offshore wind (power generation),” Graham said.

Graham also said the group has invested in Wolf Midstream, a partner in the Alberta Carbon Truck Line, which will capture and store carbon that would otherwise go into the atmosphere with conventional energy sources..

Graham, who had a science background before joining CPPIB in 2008, became CEO in February after Machin disclosed that he travelled to the United Arab Emirates, where he received a Covid-19 vaccination.

Machin was one of several high-ranking Canadian executives and prominent politicians who resigned after travelling internationally amid a government advisory to avoid non-essential travel.