February 5, 2003
Consolidated assets of the Canada Pension Plan earned approximately $1.6 billion in the three months ended December 31, 2002 for a return of 3.1%, reversing a year to date investment loss at the end of the previous quarter. Investment income for the nine months ended December 31, 2002 was approximately $114 million, resulting in a 0.8% rate of return. Consolidated CPP assets have increased by $1.2 billion to $54.8 billion since the beginning of the current fiscal year.
At December 31, 2002, the assets of the Canada Pension Plan consisted of $36.4 billion in fixed-income securities administered by the Department of Finance in Ottawa, and $18.4 billion in equities and real estate managed by the CPP Investment Board in Toronto.
The fixed-income securities consisted of $31.8 billion in federal and provincial government bonds and $4.6 billion in an interest-earning cash reserve. For the third quarter, fixed income assets earned almost $600 million for a positive estimated return of approximately 2.0%. These assets generated investment income of $3.1 billion during the nine-month period for an estimated 8.8% return.
The CPP Investment Board portfolio represents 34% of consolidated CPP assets, consisting of 93% public equities, 6% private equities and 1% real estate. In the third quarter, equities gained $1.0 billion for a positive 5.8% return. This portfolio has lost $3.0 billion during the first nine months for a negative 15.9% return.
Year to date, the CPP Investment Board has underperformed its benchmark by 0.7%. Since its inception, it has outperformed the benchmark by an annualized 2.9%.
“We continue to build and diversify our portfolio, investing in a variety of asset classes to create long term value for Canadians,” said CPP Investment Board President and Chief Executive Officer, John A. MacNaughton.
The CPP Investment Board is investing in public and private equities and real estate to help balance the overall portfolio given that traditionally CPP assets have been invested in fixed income investments, primarily bonds. Its diversification program is designed to reduce volatility while pursuing attractive risk adjusted returns.
“We are pleased the CPP has positive results for the year to date, even after one of the worst six month periods in equity markets in a century,” MacNaughton said. “On the other hand, as a long-term investor, with substantial annual cash inflows for the next twenty years, a continuation of lower equity prices would be to our advantage as we build a broad-based portfolio.”
“Our goal is to generate investment income to contribute to the financial strength of the CPP,” MacNaughton said. “Given that we are investing for today’s younger workers, we are patient investors focused on the long term.”
The CPP Investment Board is a Crown corporation created by an Act of Parliament in December 1997. It invests funds not needed by the Canada Pension Plan to pay current pensions in capital markets. Cash flows are currently invested in equities and real estate to balance the cash and bonds owned by the Canada Pension Plan. By increasing the long-term value of funds, the CPP Investment Board will help the Canada Pension Plan to keep its pension promise to Canadians. Based in Toronto, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. Its fiscal year is from April 1 to March 31. For more information on the CPP Investment Board, visit www.cppib.ca.
For further information contact:
John A. MacNaughton President and Chief Executive Officer (416) 868-4077 OR Ian Dale Vice President Communications and Stakeholder Relations (416) 868-4086 idale@cppib.ca