Fund’s investments, surviving past crises, can support innovations

By Mark Machin, President and CEO

In difficult times I find it helpful to return to what matters most. For CPP Investments, which invests the assets of the Canada Pension Plan, this means helping safeguard the security of Canadians’ retirement funds. As we face medical, economic and other challenges from COVID-19, that mission takes on even greater significance.

Our priorities are clear. First and foremost, we will continue to help ensure that the CPP is stable and sustainable for generations to come. The fund has remained resilient through past economic shocks and we are managing through this one.

Even as we confront the devastating impact of the global pandemic on people and economies around the world, our strength lets us look beyond it. In fact, the virus is accelerating the disruptive trends that have been driving business and societal change in health care, e-commerce, mobility, big data, demographic shifts and the energy transition, among others; all areas that are part of our investment strategy. And as we think about life after the pandemic, we are paying close attention to how consumer behaviour is changing, the impact on global supply chains, how cities will need to adapt and how public policy is evolving.

While we did not predict a global pandemic to come along on exactly this time frame, we were already preparing for the possibility of a recession and the end of the decade-long economic expansion. Some investors saw a short-term opportunity to time the market. We saw something else: validation of our long-term view and a reminder to stay the course.

Our strategy is working. In our fiscal 2020, the fund grew to $409.6 billion. Despite the devastating market conditions late in our fiscal year (ending March 31), we posted a net annual return of 3.1 per cent after all costs. During the period of the broad equity-market sell-off, January through March, the S&P 500 dropped by roughly 11.7 per cent, while our diversified fund saw a decrease of only 3.7 per cent. The true test of our performance is our long-term results. In the last ten years, we earned a net annualized return of 9.9 per cent.

We can say with confidence that our long-term returns are more than enough to keep the CPP sustainable.

Our mission, to build a long-term portfolio that adapts to societal and economic change, enables us to support many of the innovations needed right now for our communities and economies to regain their footing. As we manage the impacts of the pandemic, there are five critical considerations:

First, the health and security of the fund.

Second, the health and security of our people.

Third, the shutdown has made plain just how interconnected our economy is. Big companies and small, across every sector, have often unexpected interdependencies. Any economic relief efforts must take those relationships into account.

Fourth, while we advocate an “all-sector” approach, some sectors are particularly strategic to our longer-term future. Education, health care, public transportation and energy, for instance, are all critical infrastructure and need creative thinking and significant investment to earn public confidence.

And last, recovery is an invitation to build on conventional thinking and embrace innovation. The current crisis, like those that came before, will leave an indelible mark on society, its institutions, and on all of our behaviours. In many cases, the old approaches to problem-solving are not enough. We are already starting to see unexpected partnerships and innovative collaborations. Long-term progress will require a genuinely fresh perspective.

I am encouraged by Canada’s own innovation community, responding to these challenges with the creation of the Creative Destruction Labs (CDL) Recovery Vision Council. Recently formed, the council brings together leading tech entrepreneurs, inventors, investors, scientists and other leaders and thinkers to work on accelerating transformative inventions to address COVID-19, with a focus on public health and economic recovery.

I am confident that groups like CDL and so many other public and private organizations will overcome the technical, economic and even health challenges. But until we do, our biggest hurdle is managing the extreme uncertainty. There is uncertainty about when a vaccine will be available, the speed and accuracy of testing, if and for how long immunity will take effect, the availability of effective treatments and the ever-present threat of further waves.

For CPP Investments, uncertainty is a call to action. It is a reminder that our long-term perspective has served us well during past difficult times. And it is a chance to recommit to ensuring the long-term well-being of Canadians. The actions we take today will help us to meet that mission for generations to come.

This article was originally published in the Toronto Star, on May 30, 2020. View the original article here.

Fund’s investments, surviving past crises, can support innovations

By Mark Machin, President and CEO

In difficult times I find it helpful to return to what matters most. For CPP Investments, which invests the assets of the Canada Pension Plan, this means helping safeguard the security of Canadians’ retirement funds. As we face medical, economic and other challenges from COVID-19, that mission takes on even greater significance.

Our priorities are clear. First and foremost, we will continue to help ensure that the CPP is stable and sustainable for generations to come. The fund has remained resilient through past economic shocks and we are managing through this one.

Even as we confront the devastating impact of the global pandemic on people and economies around the world, our strength lets us look beyond it. In fact, the virus is accelerating the disruptive trends that have been driving business and societal change in health care, e-commerce, mobility, big data, demographic shifts and the energy transition, among others; all areas that are part of our investment strategy. And as we think about life after the pandemic, we are paying close attention to how consumer behaviour is changing, the impact on global supply chains, how cities will need to adapt and how public policy is evolving.

While we did not predict a global pandemic to come along on exactly this time frame, we were already preparing for the possibility of a recession and the end of the decade-long economic expansion. Some investors saw a short-term opportunity to time the market. We saw something else: validation of our long-term view and a reminder to stay the course.

Our strategy is working. In our fiscal 2020, the fund grew to $409.6 billion. Despite the devastating market conditions late in our fiscal year (ending March 31), we posted a net annual return of 3.1 per cent after all costs. During the period of the broad equity-market sell-off, January through March, the S&P 500 dropped by roughly 11.7 per cent, while our diversified fund saw a decrease of only 3.7 per cent. The true test of our performance is our long-term results. In the last ten years, we earned a net annualized return of 9.9 per cent.

We can say with confidence that our long-term returns are more than enough to keep the CPP sustainable.

Our mission, to build a long-term portfolio that adapts to societal and economic change, enables us to support many of the innovations needed right now for our communities and economies to regain their footing. As we manage the impacts of the pandemic, there are five critical considerations:

First, the health and security of the fund.

Second, the health and security of our people.

Third, the shutdown has made plain just how interconnected our economy is. Big companies and small, across every sector, have often unexpected interdependencies. Any economic relief efforts must take those relationships into account.

Fourth, while we advocate an "all-sector" approach, some sectors are particularly strategic to our longer-term future. Education, health care, public transportation and energy, for instance, are all critical infrastructure and need creative thinking and significant investment to earn public confidence.

And last, recovery is an invitation to build on conventional thinking and embrace innovation. The current crisis, like those that came before, will leave an indelible mark on society, its institutions, and on all of our behaviours. In many cases, the old approaches to problem-solving are not enough. We are already starting to see unexpected partnerships and innovative collaborations. Long-term progress will require a genuinely fresh perspective.

I am encouraged by Canada’s own innovation community, responding to these challenges with the creation of the Creative Destruction Labs (CDL) Recovery Vision Council. Recently formed, the council brings together leading tech entrepreneurs, inventors, investors, scientists and other leaders and thinkers to work on accelerating transformative inventions to address COVID-19, with a focus on public health and economic recovery.

I am confident that groups like CDL and so many other public and private organizations will overcome the technical, economic and even health challenges. But until we do, our biggest hurdle is managing the extreme uncertainty. There is uncertainty about when a vaccine will be available, the speed and accuracy of testing, if and for how long immunity will take effect, the availability of effective treatments and the ever-present threat of further waves.

For CPP Investments, uncertainty is a call to action. It is a reminder that our long-term perspective has served us well during past difficult times. And it is a chance to recommit to ensuring the long-term well-being of Canadians. The actions we take today will help us to meet that mission for generations to come.

This article was originally published in the Toronto Star, on May 30, 2020. View the original article here.