May 19, 2004
The total CPP portfolio, which includes investment earnings and contributions to the CPP net of benefits paid, grew to $70.5 billion in the year ending March 31, 2004, an increase of $14.9 billion from $55.6 billion the previous year.
The CPP reserve fund assets showed a $10.3 billion investment gain in fiscal 2004 compared with a $1.1 billion loss in 2003. The rate of return was 17.6 per cent versus a negative 1.5 per cent the previous year.
After several years of decline, global equity markets rebounded strongly in fiscal 2004. As a result, income from equities and real estate far surpassed fixed income returns. Equities and real estate produced income of $7.2 billion for a 31.7 per cent rate of return compared with a loss of $4.1 billion, or a negative 21.1 per cent rate of return, in 2003.
The fixed income portfolio again generated positive returns as interest rates continued to decline moderately. Combined with the CPP cash deposits, which earn interest similar to short-term government securities, fixed-income assets generated income of $3.1 billion compared with $3.0 billion the year before. The rate of return on fixed income assets was 8.7 per cent, compared with 8.4 per cent in fiscal 2003. ”Fiscal 2004 and 2003 results were each extremes that highlight the volatility one expects on a long investment journey in pursuit of investment returns that will sustain and strengthen the Canada Pension Plan,” said John MacNaughton, President and CEO, CPP Investment Board. At March 31, 2004, the assets of the Canada Pension Plan consisted of $32.8 billion in publicly traded stocks, private equities, real estate and infrastructure managed by the CPP Investment Board in Toronto, and $37.7 billion in fixed-income securities and cash administered by the Department of Finance in Ottawa. The CPP Investment Board portfolio, representing approximately 47 percent of the total CPP portfolio, consisted of 92 percent public equities, 5 percent private equities, 1 percent cash and 2 percent real estate and infrastructure.
The fixed-income securities, representing approximately 53 percent of the total CPP portfolio, consisted of $30.2 billion in federal and provincial government bonds and $7.5 billion in an interest bearing cash deposit. In another development, John A. MacNaughton, President and CEO of the CPP Investment Board, today announced his intention to retire during the current fiscal year. ”John’s extremely high standard of personal conduct, knowledge of capital markets and excellent ability to communicate, combined to provide the CPP Investment Board with credibility during our first phase of development,” said Gail Cook-Bennett, Chairperson of the CPP Investment Board. “Building a first-class team of professionals committed to the management of the total portfolio, to careful implementation of investment decisions and to effective external interactions is his proud achievement.” Mr. MacNaughton will continue to lead the organization while the Board of Directors conducts a search for his successor. Mr. MacNaughton was appointed president and CEO of the CPP Investment Board in September 1999. Prior to joining the CPP Investment Board, Mr. MacNaughton was president of Burns Fry and then Nesbitt Burns until his retirement in the spring of 1999. CPP bond and cash assets held by the federal Department of Finance will be transferred to the CPP Investment Board beginning in fiscal 2005. The transfer of $30.2 billion in bonds began on May 1, 2004, and will take three years to complete. The transfer of cash will begin September 2004, and take a year to complete. Effective September 1, 2004, the CPP Investment Board will also assume the primary responsibility, currently performed by the federal government, for ensuring that the CPP has sufficient funds to pay current expenses and benefits. Based on actuarial projections, CPP contributions are expected to exceed benefits until 2021, providing a 17-year period before a portion of the investment income is needed to help pay CPP benefits. The CPP Investment Board is a Crown corporation created by an Act of Parliament in December 1997. It invests in capital markets the funds not needed by the CPP to pay current pensions. Cash flows are currently invested in equities, real estate and infrastructure to balance the cash and bonds owned by the Canada Pension Plan. 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 about the CPP Investment Board and to read the 2004 Annual Report, visit www.cppib.ca. A teleconference has been scheduled for May 19, at 11 a.m. EDT to discuss these results. Journalists who wish to participate please contact Jennifer Ross at 416-868-4682 or firstname.lastname@example.org. The teleconference will also be webcast live at www.cppib.ca.
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Vice President – Communications and Stakeholder Relations
Manager – Communications and Stakeholder Relations