Canadian pension fund posts C$7.2bn gain

Canada Pension Plan Investment Board president David Denison credited ‘the continued strength in the equity markets’ for the increase. Real estate posted essentially flat returns in the three months to the end of September

Buoyed by recovering public equity markets, the Canada Pension Plan Investment Board (CPPIB) posted a C$7.2 billion (€4.6 billion; $6.9 billion) gain in the value of its investment fund since 30 June, now worth C$123.8 billion.

CPPIB president David Denison said in a statement “the continued strength in the equity markets” was a “major factor” for the increase, which tops C$13 billion since 31 March. At 30 September, public equity positions represented 44.6 percent of the pension overall portfolio, or C$55.3 billion.

We also expect the portion of the portfolio that's invested in infrastructure to grow

Mark Wiseman

Infrastructure was also a major contributor. Of the C$7.2 billion increase in value since June, C$1.3 billion or about 18 percent, came from CPPIB’s infrastructure portfolio, now valued at C$5.9 billion. That value represents 4.8 percent of the pension’s overall portfolio, up from 3.9 percent at 30 June.

CPPIB spokesperson May Chong said the infrastructure figures were boosted by the board’s C$2.1 billion buyout of the Macquarie Communications Infrastructure Group, which closed during the quarter ended 30 September.

The Canadian pension’s other two illiquid asset classes – private equity and real estate – essentially stayed the same. Private real estate investments were valued at C$7.5 billion as of 30 September, down 0.5 percent from their June levels. Private equity investments across Canada, developed international markets and emerging markets were worth C$13.9 billion, up 0.5 percent from their June levels.

Overall, private equity now represents 11.2 percent of the board’s portfolio value, while private real estate represents about 6 percent.

While significant, the C$7.2 billion gain is just a small step toward the pension’s overall growth targets for the next seven years. “At the total fund level, we’re expecting that C$120 billion dollars to actually double in size in the next five to seven years,” Mark Wiseman, head of the board’s private investments division, which manages infrastructure and private equity, said at the PEI Infrastructure Investor Forum in New York in September.

Wiseman said the value would double “years both because [of] investment returns but also because the fund has net cash inflows from working Canadians”.

“We also expect the portion of the portfolio that’s invested in infrastructure to grow,” he added. “You can expect us to continue to be very active in the asset class over the next several years”

CPPIB, which primarily invests its money through in-house investment professionals, has about 100 people in its private investments division. Of that, 24 are specifically dedicated to infrastructure, Wiseman said.

The pension also has a separate real estate investment team headed by Wenzel Hoberg. CPPIB, which began investing ten years ago, is an independent asset manager that invests the funds that the Canada Pension Plan, the country’s national pension system, does not need to pay out for its current benefits.

Since it began investing, it has generated C$37.2 billion in investment income, an annualised investment return rate of 5.2 percent, according to a press release.