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December 2022: State of the Fund

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This has been a challenging year for many Canadians.

The lingering global pandemic, prolonged war in Ukraine and other global conflicts, persistent inflation and the steady rise of interest rates continue to concern us all.

At our recent public meetings held across the country and virtually, you told us how these issues and more were directly impacting your lives.

We want to assure you that the Canada Pension Plan Fund is strong and the future value of your benefits remains solid. As one of the 10 largest and most enduring pension plans in the world, we are built to weather all types of economic and geopolitical pressures, just like the ones we face today.

Keeping a clear purpose

While we can’t predict what exactly will happen in 2023, we believe these challenges will continue. Canadians can take pride in the fact that their Plan is backed by a fund that has a universally admired and respected business reputation and is managed by investment professionals dedicated to maximizing the returns of the Fund without undue risk.

CPP Investments’ purpose is to help improve the financial security of Canadian retirees. This purpose, from which we never waver, helps us manage risk and build resilience in difficult times. We expect periods of uncertainty; we plan for them and have designed the Fund to withstand exactly these kinds of pressures.

Due to the cyclical nature of markets, some quarterly or annual declines in returns are inevitable. That’s okay. Market cycles can last several years, but we invest with a 75-year time horizon.

While the value of our assets may fluctuate over that 75-year period, our investing approach and risk management help to ensure the overall trend is positive. Our most recent 10-year annual return is 10.1% and the Fund is now C$529 billion dollars.1


Operational Highlights

  • Committed portfolio and operations to net-zero by 2050.
  • Rated the world’s most transparent pension fund by the Global Pension Transparency Benchmark.
  • Held our 10th Annual Living our Guiding Principles Day, where more than 2,000 employees gathered to discuss what it means to operate with integrity, partnership, and high performance.

Big Deals

  • After a 10-year investment, we exited our 37% stake in Australia’s AMP Capital Retail Trust at a transaction value of C$2.0 billion.
  • Expanded our investment in Ports America to become the 100% owner of North America’s largest marine terminal operator.
  • Completed France’s first commercial-scale offshore wind project, the 480-megawatt Saint-Nazaire Offshore Wind Farm, alongside EDF Renewables and Enbridge Inc. The wind farm will produce the equivalent of the consumption of 700,000 people with electricity every year.

Active management is a strength

One of our greatest strengths is our active management approach, a style of investing that enables us to exceed market returns. Rather than buying a benchmark basket of securities and letting it rise and fall in line with the market, we search worldwide for the very best investments. We invest in all major asset classes and have the ability to invest in the largest economies across the globe. We seek to own significant positions in companies that we believe have the potential to outperform over the long term.

Leaders in sustainable investing

Despite today’s market challenges, we recognize the importance of sustainability to long-term value creation.

That’s why earlier this year, we committed CPP Investments to net-zero greenhouse gas emissions by 2050. This decision was made only after significant study of what this commitment would mean for our organization and its investment activities. It’s worth noting that more than 10 years ago, we started to incorporate climate risk into how we manage the portfolio. Over the past two years, we’ve expanded that to now view all opportunities with climate impacts in mind.

This fall, our new Chief Sustainability Officer, Richard Manley presented our Framework to help companies develop transparent, credible plans to reduce their greenhouse gas emissions. This will help us create and protect the value of the Fund, as the whole economy transitions to net zero. You can read more here.

What this means for Canadians in 2023

We remain cautiously optimistic about the year ahead. Yes, we’re in for a bumpy ride, but market volatility is inevitable. It’s how speculative bubbles are deflated, and expectations reset. We’re confident our portfolio will endure the ups and the downs and, when prices for attractive assets decline, position us to take advantage of the long-term opportunities that emerge.

Canadians benefit from one of the most advanced pension systems in the world. We’re proud of the foundation that Canada has created, and we at CPP Investments fully intend to protect it, so that today’s contributors and beneficiaries can be confident in their retirement security in the future.

Sincerely,

John

1 As at September 30, 2022.

About the Author

graham John 2016.original

John Graham

President & Chief Executive Officer

This has been a challenging year for many Canadians. The lingering global pandemic, prolonged war in Ukraine and other global conflicts, persistent inflation and the steady rise of interest rates continue to concern us all. At our recent public meetings held across the country and virtually, you told us how these issues and more were directly impacting your lives. We want to assure you that the Canada Pension Plan Fund is strong and the future value of your benefits remains solid. As one of the 10 largest and most enduring pension plans in the world, we are built to weather all types of economic and geopolitical pressures, just like the ones we face today. Keeping a clear purpose While we can’t predict what exactly will happen in 2023, we believe these challenges will continue. Canadians can take pride in the fact that their Plan is backed by a fund that has a universally admired and respected business reputation and is managed by investment professionals dedicated to maximizing the returns of the Fund without undue risk. CPP Investments’ purpose is to help improve the financial security of Canadian retirees. This purpose, from which we never waver, helps us manage risk and build resilience in difficult times. We expect periods of uncertainty; we plan for them and have designed the Fund to withstand exactly these kinds of pressures. Due to the cyclical nature of markets, some quarterly or annual declines in returns are inevitable. That’s okay. Market cycles can last several years, but we invest with a 75-year time horizon. While the value of our assets may fluctuate over that 75-year period, our investing approach and risk management help to ensure the overall trend is positive. Our most recent 10-year annual return is 10.1% and the Fund is now C$529 billion dollars.1 Operational Highlights Committed portfolio and operations to net-zero by 2050. Rated the world’s most transparent pension fund by the Global Pension Transparency Benchmark. Held our 10th Annual Living our Guiding Principles Day, where more than 2,000 employees gathered to discuss what it means to operate with integrity, partnership, and high performance. Big Deals After a 10-year investment, we exited our 37% stake in Australia’s AMP Capital Retail Trust at a transaction value of C$2.0 billion. Expanded our investment in Ports America to become the 100% owner of North America’s largest marine terminal operator. Completed France’s first commercial-scale offshore wind project, the 480-megawatt Saint-Nazaire Offshore Wind Farm, alongside EDF Renewables and Enbridge Inc. The wind farm will produce the equivalent of the consumption of 700,000 people with electricity every year. Active management is a strength One of our greatest strengths is our active management approach, a style of investing that enables us to exceed market returns. Rather than buying a benchmark basket of securities and letting it rise and fall in line with the market, we search worldwide for the very best investments. We invest in all major asset classes and have the ability to invest in the largest economies across the globe. We seek to own significant positions in companies that we believe have the potential to outperform over the long term. Leaders in sustainable investing Despite today’s market challenges, we recognize the importance of sustainability to long-term value creation. That’s why earlier this year, we committed CPP Investments to net-zero greenhouse gas emissions by 2050. This decision was made only after significant study of what this commitment would mean for our organization and its investment activities. It’s worth noting that more than 10 years ago, we started to incorporate climate risk into how we manage the portfolio. Over the past two years, we’ve expanded that to now view all opportunities with climate impacts in mind. This fall, our new Chief Sustainability Officer, Richard Manley presented our Framework to help companies develop transparent, credible plans to reduce their greenhouse gas emissions. This will help us create and protect the value of the Fund, as the whole economy transitions to net zero. You can read more here. What this means for Canadians in 2023 We remain cautiously optimistic about the year ahead. Yes, we’re in for a bumpy ride, but market volatility is inevitable. It’s how speculative bubbles are deflated, and expectations reset. We’re confident our portfolio will endure the ups and the downs and, when prices for attractive assets decline, position us to take advantage of the long-term opportunities that emerge. Canadians benefit from one of the most advanced pension systems in the world. We’re proud of the foundation that Canada has created, and we at CPP Investments fully intend to protect it, so that today’s contributors and beneficiaries can be confident in their retirement security in the future. Sincerely, John 1 As at September 30, 2022. About the Author John Graham President & Chief Executive Officer
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