CPP investments returned 1.53% in Q2par Andrew Rickard | August 15 2016 11:29AM
Despite choppy global markets, the Canada Pension Plan (CPP) Fund posted a gross investment return of 1.53% for the second quarter of 2016.
As of June 30 the assets of the CPP fund stood at $287.3 billion, which is $8.4 billion higher than they were at they were at the end of the first quarter of this year. This gain consists of $4.3 billion in net CPP contributions and $4.1 billion in net investment income, which represents a gross investment return of 1.53% for the quarter or 1.45% net of all costs.
At the end of Q2, the fund reports five-year annualized nominal and real rates of return of 10.8% and 9.1% respectively, while the ten-year annualized nominal and real rates of return are 7.3% and 5.5% respectively. These investment rates of return are after all CPPIB costs and are calculated on a time-weighted basis. The CPP holds 33.2% of its portfolio in public equities, 20.8% in private equities, 25.9% in fixed income, 12.9% in real estate, and 7.2% in infrastructure investments.
Experiencing ongoing volatility
“Global investors experienced ongoing volatility this quarter, generating mixed results across major equity markets. Amid these challenges, the Fund’s increase was primarily driven by positive fixed income performance, public equity gains in Canada and the U.S., and the performance of our private asset portfolio,” said CPP Investment Board president and CEO Mark Machin. “In the quarter, we acted on a number of investment opportunities across a range of asset classes and markets that further diversified the portfolio to prudently create long-term value for the Fund.”
The CPP quarterly report notes that, according to the Office of the Chief Actuary's most recent study, the current contribution rate of 9.9% is sustainable for the next 75 years. However, CPP contributions are only expected to exceed annual benefit payments until 2023; after this point a portion of the investment income from CPPIB will be needed to help pay pensions.