November 15, 1999
The Canada Pension Plan Investment Board received $301 million in new cash from the Canada Pension Plan in the second quarter of fiscal 2000. These funds were invested as soon as they were received. As a result we had $818 million in invested assets at September 30, 1999, compared with $533 million at June 30, 1999. The share of the Canada Pension Plan assets managed by the Canada Pension Plan Investment Board is presently small, but will grow steadily in the coming years. Today the Canada Pension Plan has total assets of approximately $38 billion. In addition to the $818 million under management at the CPP Investment Board, $30.6 billion (at cost) is invested in provincial and federal government bonds with the remainder held in a short-term operating reserve. Both the bond portfolio and the operating reserve are administered by the Federal Government. In determining our asset mix, we have taken into consideration the amounts that are already invested in governments bonds and as a result, 100% of new investments by the CPP Investment Board are allocated to equities. Approximately 80 percent of the Canada Pension Plan assets under our management are invested in the shares of major Canadian companies and the remainder in foreign equities. The Canadian investments substantially replicate the Toronto Stock Exchange 300 Composite Index. The foreign investments substantially replicate the Standard & Poor?s 500 Index of leading U.S. companies and the EAFE (Europe, Australia and Far East) Index of about 1,000 overseas companies. These indexes are a cost-efficient way to invest in domestic and foreign markets and to diversify investment risk among different global economies. Cash from the Canada Pension Plan is invested by the Canada Pension Plan Investment Board as received. Investments held throughout the quarter have gains or losses that closely track the index returns for the period, and cash flows invested during the period accumulate gains or losses based on the movement of the index from the day the cash flow was invested. A combination of negative returns in both the domestic and foreign equity markets and a significant decline in the domestic market subsequent to the receipt of a large cash flow in July resulted in a $13 million loss for the quarter.
Investment gains in the first quarter of fiscal 2000 and a loss in the current quarter reflect the short-term volatility of equity markets.Over the long-term, however, equity investments are expected to create positive growth for beneficiaries and contributors. The Canada Pension Plan Investment Board was created by an Act of Parliament in December 1997. It receives funds not needed by the Canada Pension Plan to pay current pensions and invests them in capital markets. By increasing the long-term value of these funds, the CPP Investment Board will help the Canada Pension Plan to keep its pension promise to Canadians. The CPP Investment Board is a corporation governed and managed separately from the Canada Pension Plan. The Canada Pension Plan itself is the joint responsibility of the federal and provincial governments which set contribution rates and benefit levels. The plan is administered by the federal government, which collects contributions and pays pensions.
For further information contact:
Canada Pension Plan Investment Board
181 University Avenue Suite 1800 Toronto,
Ontario M5H 3M7