May 17, 2006
The CPP fund, which includes investment earnings and contributions not needed to pay current benefits, grew to $98 billion in the year ending March 31, 2006, an increase of $16.7 billion from $81.3 billion the previous year.
This increase included $13.1 billion in investment gains as well as $3.6 billion in additional contributions. The rate of return earned by the fund was 15.5 per cent which compares to the 14.9 per cent median return for Canadian pension plans over this same period and the fund’s return of 8.5 per cent for the previous year. Equity markets performed exceptionally well in fiscal 2006 accounting for approximately 85 per cent of the fund’s gains. Canadian public markets were strong in all sectors, especially the energy and financial services sectors and as a result, Canadian equity holdings generated an overall rate of return of 29.9 per cent. Beginning in fiscal 2006, the near-term asset-mix target of the CPP Investment Board was refined to 60 per cent equity, 30 per cent fixed income and 10 per cent real return assets. At the end of the fiscal year, the CPP fund had made good progress in achieving this near-term asset mix. At March 31, 2006, equities totalled $61.7 billion or 63 per cent of the CPP fund. This consisted of publicly traded stocks valued at $57.3 billion or 58.5 per cent of the total fund plus private equity valued at $4.4 billion or 4.5 per cent of the total fund. The fixed income component was comprised of government bonds and money market securities totalling $27.8 billion or 28.3 per cent of the fund. Real return assets represented $8.5 billion or 8.7 per cent. This consisted of real estate valued at $4.2 billion or 4.3 per cent of the fund, inflation-linked bonds valued at $4 billion or 4 per cent of the fund and infrastructure investments valued at $350 million or 0.4 per cent of the fund. “Our key investment goal this year was to further diversify the portfolio by risk/return attributes and geography,” said David Denison, President and CEO, CPP Investment Board. “As a result we increased our investments in real estate, inflation-linked bonds and infrastructure to $8.5 billion or 8.7 per cent of the overall portfolio from just $1 billion or 1.2 per cent at the beginning of the year.” “With regard to geographical diversification, given that we have $63 billion invested in Canada, we will continue to seek additional international investments because they help reduce concentration risk and over-dependence of the CPP on the domestic economy.” Based on actuarial projections, CPP contributions are expected to exceed benefits until 2022, providing a 16-year period before a portion of the investment income is needed to help pay CPP benefits. 1 According to a survey by RBC Dexia Investor Services, the median performance of Canadian pension plans is 14.9 per cent for the 12 months ending March 2006.
To see a summary of the portfolio, Portfolio Summary
The CPP Investment Board invests the funds not needed by the Canada Pension Plan to pay current benefits. With a mandate from the federal and provincial governments, the CPP Investment Board is accountable to Parliament, to the federal and provincial finance ministers who serve as the stewards of the CPP and reports to 16 million contributors and beneficiaries. 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, visit www.cppib.ca.
A teleconference has been scheduled for May 17, at 11 a.m. EDT to discuss these results. Journalists who wish to participate please contact Jennifer Ross at 416-868-4682 or email@example.com. The teleconference will also be webcast live at www.cppib.ca.
For further information contact:
John Cappelletti, Manager, Communications
Ian Dale, Vice President, Communications and Stakeholder Relations