August 11, 2005
The CPP reserve fund, which includes investment earnings and CPP contributions not needed to pay current pensions, grew by $5.7 billion to $87 billion during the quarter ending June 30, 2005.
During this three-month period, the CPP reserve fund earned $3 billion from investments in publicly traded stocks, private equity, real estate, infrastructure and government bonds for a rate of return of 3.6 per cent. The fund grew by a further $2.7 billion from CPP contributions not needed to pay current pensions.
During the past five years the CPP reserve fund has earned a real (inflation-adjusted) rate of return of 4.6 per cent which exceeds the 4.1 per cent real rate of return the Chief Actuary of Canada states is required to help sustain the CPP over the long term. ”The strategy we announced earlier this fiscal year to further diversify the CPP reserve fund into real return assets, such as real estate and infrastructure, will continue to be our focal point for the balance of the year,” said David Denison, President and CEO, CPP Investment Board. “During the first quarter, we made notable progress on this objective with the purchase of a 50 per cent ownership interest in a portfolio of 11 Canadian core office properties from the Oxford Properties Group.” At June 30, 2005, the CPP reserve fund consisted of 55.2 per cent ($48.1 billion) of publicly traded stocks, 33.1 per cent ($28.8 billion) of government bonds, 4.1 per cent ($3.6 billion) in cash and money market securities, 4 per cent ($3.4 billion) of real return assets and 3.6 per cent ($3.1 billion) of private equity. Based on actuarial projections, CPP contributions are expected to exceed benefits paid until 2022, providing a 17-year period before a portion of the investment income from the CPP reserve fund is needed to help pay CPP benefits. Since 1999, when the CPP Investment Board began its investment program, the CPP reserve fund has almost doubled to $87 billion, with about 60 per cent, or $24.9 billion, of the increase coming from investment gains. The Chief Actuary of Canada estimates the fund will grow to approximately $147 billion by 2010.
CPP Investment Board
The CPP Investment Board invests in capital markets the funds not needed by the Canada Pension Plan to pay current pensions. Cash flows are currently invested in equities and real return assets, including real estate and infrastructure, 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 16 million Canadians. With a mandate from the federal and provincial governments, the CPP Investment Board is accountable to Parliament and to the federal and provincial finance ministers who serve as the stewards of the CPP. Based in Toronto, 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, www.cppib.ca.
A teleconference has been scheduled for today at 11 a.m. EDT to discuss the first quarter results. Journalists who wish to participate in the call need to contact Jennifer Ross at 416-868-4682 or jross@cppib.ca. The teleconference will also be webcast live at www.cppib.ca.
For further information contact:
John Cappelletti, Manager, Communications
416-868-0308
Or
Ian Dale, Vice President, Communications and Stakeholder Relations
416-868-4086