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Rest assured, Canada Pension Plan is resilient despite today’s choppy markets

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Recently, CPP Investments had the pleasure of hearing directly from Canadians as our senior leaders crisscrossed the country to host in-person public meetings capped by a national virtual meeting.

What I heard is that Canadians are worried about the global economy and the repercussions for their retirement security. That’s no surprise, considering the news we’ve all faced this year.

The cost of living has been on everyone’s mind as inflation reached multi-decade highs. Russia’s invasion of Ukraine and monetary policy initiatives by the Bank of Canada, U.S. Federal Reserve and many other Western central banks have made this a remarkably volatile year in financial markets. I also heard your concerns about the world that future generations will inherit amid an existential climate threat.

It’s understandable that this backdrop would make Canadians feel uneasy about their financial future.

What I can tell you is this: in a world that’s awash in geopolitical and economic uncertainty, the 21 million contributors and beneficiaries who CPP Investments works to support every day can have confidence that the Canada Pension Plan (CPP) Fund will be there for them in retirement.

The Office of the Chief Actuary (OCA) of Canada is tasked with assessing the CPP’s long-term sustainability every three years. In the most recent review, the OCA confirmed that, as at Dec. 31, 2018, the CPP remains sustainable over a 75-year horizon.

So, that means for generations to come, Canadians can count on the CPP to serve as the foundation for their retirement, along with their savings and workplace pensions, for those who are fortunate enough to have one.

As a country, we can take pride in having the financial bedrock that the CPP Fund provides. Since CPP Investments was created in 1997, we’ve had a singular focus on growing the CPP Fund by investing its assets. And we’ve come a long way since the initial transfer of $12.1 million from the CPP in 1999 gave us a springboard for our first investments.

We are not immune to the conditions that have caused turmoil in markets this year, but our prudent, diversified approach has allowed us to demonstrate resilience. We recently announced that CPP Investments ended its fiscal second quarter with $529 billion in assets, an increase of $6 billion from the previous quarter. The downturn in equity and fixed-income markets that persisted through the quarter limited our return on investing activities to 0.2 per cent, which nonetheless outpaced major global stock markets, including the S&P 500, which sank 5.3 per cent in the same period.

One of CPP Investments’ advantages, particularly at a time like this when it seems the mood of the market can swing from one day to the next, is our long-term approach. Our active management strategy of investing across asset classes and geographies is designed to deliver returns over the long haul. This investing style has resulted in a 10-year net return of 10.1% as at the end of September 2022.

Our long-term approach means the 21 million Canadians who depend on the CPP can take comfort in knowing that we’re not chasing fad investments that might be the hottest, latest thing in markets one day, only to come crashing down the next. We’re investors, not speculators.

As the end of the calendar year approaches, there’s no immediate end in sight for the uncertainty that has disrupted markets and the economy thus far in 2022. Nevertheless, I’m cautiously optimistic.

Why?

Because CPP Investments’ distinctive mandate and approach leaves us well positioned to navigate bumps in the road.

We may have some more challenging times ahead, but we’re creating value for generations.

John Graham is CEO of CPP Investments, the global investment organization that manages the CPP Fund. This op-ed was published by the Financial Post on December 1, 2022.

Recently, CPP Investments had the pleasure of hearing directly from Canadians as our senior leaders crisscrossed the country to host in-person public meetings capped by a national virtual meeting. What I heard is that Canadians are worried about the global economy and the repercussions for their retirement security. That’s no surprise, considering the news we’ve all faced this year. The cost of living has been on everyone’s mind as inflation reached multi-decade highs. Russia’s invasion of Ukraine and monetary policy initiatives by the Bank of Canada, U.S. Federal Reserve and many other Western central banks have made this a remarkably volatile year in financial markets. I also heard your concerns about the world that future generations will inherit amid an existential climate threat. It’s understandable that this backdrop would make Canadians feel uneasy about their financial future. What I can tell you is this: in a world that’s awash in geopolitical and economic uncertainty, the 21 million contributors and beneficiaries who CPP Investments works to support every day can have confidence that the Canada Pension Plan (CPP) Fund will be there for them in retirement. The Office of the Chief Actuary (OCA) of Canada is tasked with assessing the CPP’s long-term sustainability every three years. In the most recent review, the OCA confirmed that, as at Dec. 31, 2018, the CPP remains sustainable over a 75-year horizon. So, that means for generations to come, Canadians can count on the CPP to serve as the foundation for their retirement, along with their savings and workplace pensions, for those who are fortunate enough to have one. As a country, we can take pride in having the financial bedrock that the CPP Fund provides. Since CPP Investments was created in 1997, we’ve had a singular focus on growing the CPP Fund by investing its assets. And we’ve come a long way since the initial transfer of $12.1 million from the CPP in 1999 gave us a springboard for our first investments. We are not immune to the conditions that have caused turmoil in markets this year, but our prudent, diversified approach has allowed us to demonstrate resilience. We recently announced that CPP Investments ended its fiscal second quarter with $529 billion in assets, an increase of $6 billion from the previous quarter. The downturn in equity and fixed-income markets that persisted through the quarter limited our return on investing activities to 0.2 per cent, which nonetheless outpaced major global stock markets, including the S&P 500, which sank 5.3 per cent in the same period. One of CPP Investments’ advantages, particularly at a time like this when it seems the mood of the market can swing from one day to the next, is our long-term approach. Our active management strategy of investing across asset classes and geographies is designed to deliver returns over the long haul. This investing style has resulted in a 10-year net return of 10.1% as at the end of September 2022. Our long-term approach means the 21 million Canadians who depend on the CPP can take comfort in knowing that we’re not chasing fad investments that might be the hottest, latest thing in markets one day, only to come crashing down the next. We’re investors, not speculators. As the end of the calendar year approaches, there’s no immediate end in sight for the uncertainty that has disrupted markets and the economy thus far in 2022. Nevertheless, I’m cautiously optimistic. Why? Because CPP Investments’ distinctive mandate and approach leaves us well positioned to navigate bumps in the road. We may have some more challenging times ahead, but we’re creating value for generations. John Graham is CEO of CPP Investments, the global investment organization that manages the CPP Fund. This op-ed was published by the Financial Post on December 1, 2022.
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