CPP ended the first quarter of the 2014 fiscal year on June 30, 2013, and it reported net assets of $188.9 billion.
That compares to $183.3 billion at the end of the previous quarter. The CPPIB says the $5.6 billion increase for the quarter consisted of $1.9 billion in net investment income after operating costs, and $3.7 billion in net CPP contributions.
Its portfolio delivered gross investment returns of 1.1% for the quarter.
Read: CPP reforms won’t help upcoming retirees
“We would characterize the quarter as relatively turbulent compared to recent reporting periods,” says Mark Wiseman, CEO. “Interest rates rose significantly as bond markets fell, while volatility increased across major equity markets producing mixed returns.”
He adds, “A balanced portfolio, diverse assets, global reach, and exposure to privately-held investments contributed to our results.”
Read: POV: CPP versus RRSP
Some investment highlights
In terms of private Investments, CPPIB completed a €175 million investment in Ista International GmbH, alongside CVC Capital Partners and Ista management.
Also in the private sector, the board expanded its 50/50 Canadian joint venture with Oxford Properties Group. As part of a recent transaction, CPPIB acquired 50% interest in Upper Canada Mall in Newmarket, as well as 50% stake in Les Galeries de la Capitale in Quebec.
In the public market, CPPIB entered into an agreement with TORC Oil & Gas for a $170 million. The board also agreed to acquire a 27.6% stake in Rio de Janeiro-based Aliansce Shopping Centers S.A. for equity of US$480 million.
Long-term sustainability
In the latest triennial review released in November 2010, the chief actuary of Canada reaffirmed CPP remains sustainable at the current contribution rate of 9.9% throughout the next 75 years.
Those projections are based on the assumption the fund will attain a 4% real rate of return, which takes into account the impact of inflation. CPPIB’s 10-year annualized nominal rate of return of 6.9%, or 5% on a real rate of return basis, is above the chief actuary’s prospective 4% real rate of return assumption.
The Chief Actuary’s report also indicates CPP contributions are expected to exceed annual benefits paid until 2021, when a portion of the investment income from CPPIB will be needed to help pay pensions.
Read:
6 ways to help cash-strapped retirees
Canada needs a national pension strategy