SYS-CON MEDIA Authors: Xenia von Wedel, Peter Silva, Glenn Rossman, Ava Smith, Elizabeth White

News Feed Item

CPP Fund Totals $219.1 Billion at 2014 Fiscal Year-End

$35.8 Billion Annual Increase

TORONTO, ONTARIO -- (Marketwired) -- 05/23/14 -- All figures in Canadian dollars unless otherwise noted.

The CPP Fund ended its fiscal year on March 31, 2014 with net assets of $219.1 billion, compared to $183.3 billion at the end of fiscal 2013. The $35.8 billion increase in assets for the year consisted of $30.1 billion in net investment income after operating costs and $5.7 billion in net CPP contributions. The portfolio delivered a gross investment return of 16.5% for fiscal 2014.

"All of our investment teams made material contributions to the CPP Fund this year, producing CPPIB's largest level of annual investment income since inception," said Mark Wiseman, President & Chief Executive Officer. "Although we are pleased with these annual results, this relatively short-term performance is far less meaningful than our long-term results as financial markets can move sharply in either direction over shorter time horizons. Our highly diversified portfolio aims to produce long-term returns through volatile cycles."

In the 10-year period up to and including fiscal 2014, CPPIB has contributed $95.1 billion in cumulative net investment income to the Fund after operating costs, and over $110 billion since inception.

"While returns in global equity markets bolstered results, all of our active management programs produced significant annual gains and strengthened our future position," added Mr. Wiseman. "Our teams had a very active year leveraging CPPIB's comparative advantages globally. They added investments that fit our enduring portfolio, further diversify the Fund and will generate long-term growth. Looking ahead, we also expanded our capabilities to access, secure and manage assets in markets that are central to our strategy in the coming decades with the launch of offices in Sao Paulo and New York."

Long-Term Sustainability

In the recent triennial review released in December 2013, the Chief Actuary of Canada reaffirmed that, as at December 31, 2012, the CPP remains sustainable at the current contribution rate of 9.9% throughout the 75-year period of his report. The Chief Actuary's projections are based on the assumption that the Fund will attain a prospective 4.0% real rate of return, which takes into account the impact of inflation. CPPIB's 10-year annualized nominal rate of return of 7.1%, or 5.1% on a real rate of return basis, is above the Chief Actuary's assumption over this same period. These figures are reported net of operating costs to be consistent with the Chief Actuary's approach.

The recent Chief Actuary's report also extended the timeframe in which CPP contributions are expected to exceed paid annual benefits to the end of 2022. Thereafter, a modest portion of the investment income from CPPIB will be needed to help pay pensions.

"We are pleased that our 10-year returns exceed the Chief Actuary's assumption and we remain confident that our strategy will generate the returns needed to help sustain the CPP over longer periods of time," said Mr. Wiseman. "In seeking a maximum rate of return without undue risk of loss, our focus remains on CPPIB's exceptionally long investment horizon and our uncompromising discipline in investing."

Performance Against Benchmarks

CPPIB measures its performance against a market-based benchmark, the CPP Reference Portfolio, representing a passive portfolio of public market investments that can reasonably be expected to generate the long-term returns needed to help sustain the CPP at the current contribution rate.

In fiscal 2014, the CPP Fund's strong total portfolio return of 16.5% closely corresponded to the CPP Reference Portfolio with $514 million in gross dollar value-added (DVA) above the CPP Reference Portfolio's return. Despite the strong CPP Reference Portfolio return, we outperformed the benchmark due to strong income and valuation gains from our privately-held assets. Net of all operating costs, the investment portfolio essentially matched the CPP Reference Portfolio's return, producing negative $62 million in dollar value-added.

"The DVA results reflect a year in which public equity markets realized exceptional gains," said Mr. Wiseman. "With private market assets now representing a major proportion of the portfolio, we expect the CPP Reference Portfolio to outpace our investment portfolio over shorter-time horizons when there is strong public market performance, since there is typically a valuation lag between private and public market holdings as there is not an observable price until sale. And, the benchmark sets a high standard. We have conviction that our private market assets will outperform the public markets equivalents of the CPP Reference Portfolio over the long term. In addition, private assets work to further diversify and strengthen the resiliency of our portfolio resulting in less volatility over time."

Given our long-term view and risk/return accountability framework, we track cumulative value-added returns since the April 1, 2006 inception of the CPP Reference Portfolio. Cumulative gross value-added over the past eight years considerably outperformed the benchmark totalling $5.5 billion. Over this period cumulative costs to operate CPPIB were $2.5 billion, resulting in net dollar value-added of $3.0 billion.

Portfolio Performance by Asset Class

Portfolio performance by asset class is included in the table below. A more detailed breakdown of performance by investment department is included in the CPPIB Annual Report for fiscal 2014, which is available at www.cppib.com.


----------------------------------------------------------------------------
PORTFOLIO RETURNS(1)
----------------------------------------------------------------------------
Asset Class(2)                                  Fiscal 2014     Fiscal 2013
----------------------------------------------------------------------------
Canadian public equities                               15.6%            4.2%
Canadian private equities                              30.1%            3.4%
----------------------------------------------------------------------------
Public foreign developed market equities               26.3%           13.2%
Private foreign developed market equities              35.1%           16.8%
----------------------------------------------------------------------------
Public emerging market equities                         5.8%            2.4%
Private emerging market equities                       36.8%            7.4%
----------------------------------------------------------------------------
Bonds and money market securities(3)                    0.3%            4.0%
Non-marketable bonds                                   -0.1%            8.2%
Other debt                                             20.0%           15.1%
----------------------------------------------------------------------------
Real estate                                            18.0%            9.2%
Infrastructure                                         16.6%            8.8%
----------------------------------------------------------------------------
Investment Portfolio(4)                                16.5%           10.1%
----------------------------------------------------------------------------
(1)  Before CPPIB operating expenses.
(2)  Investment results by asset class are reported on an unhedged Canadian
     dollar basis as any currency hedging takes place at the total CPP Fund
     level. Results are calculated on a time-weighted basis.
(3)  The Fund's remaining allocation to real return bonds was sold within
     fiscal 2014. Return contributions from real return bonds are reflected
     in Bonds and money market securities in both years shown.
(4)  The total Fund return in fiscal 2014 includes a loss of $543 million
     from currency hedging activities and a $1,005 million gain from
     absolute return strategies, which are not attributed to an asset class.

Asset Mix

At the end of fiscal 2014, the Fund's net assets were valued at $219.1 billion, a year-over-year increase of $35.8 billion net of operating costs of $576 million or 29.3 basis points.

We continued to diversify the portfolio by risk/return characteristics and geography during fiscal 2014. Canadian assets represented 31% of the portfolio, and totalled $68.0 billion. Foreign assets represented 69% of the portfolio, and totalled $151.1 billion.


----------------------------------------------------------------------------
FOR THE YEAR ENDED
MARCH 31 ($ billions)                  2014    2013    2012    2011    2010
----------------------------------------------------------------------------

CHANGE IN NET ASSETS

  Net contributions                     5.7     5.5     3.9     5.4     6.1

  Investment income net of
   operating expenses                  30.1    16.2     9.5    15.2    16.0
----------------------------------------------------------------------------
Increase in net assets                 35.8    21.7    13.4    20.6    22.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------

AS AT MARCH 31 ($ billions)            2014    2013    2012    2011    2010
----------------------------------------------------------------------------
ASSET MIX                      (%)      ($)     ($)     ($)     ($)     ($)
Equities(1)
  Canada                       8.5     18.6    15.3    14.2    21.0    18.5
  Foreign developed markets   34.5     75.6    64.0    56.7    50.8    46.2
  Emerging markets             5.7     12.6    12.4    10.6     7.6     6.5
Fixed income
  Non-marketable bonds        10.6     23.4    24.4    23.6    21.8    22.7
  Marketable bonds            14.2     31.0    28.5    21.2    19.7    17.1
  Other debt                   5.2     11.4     8.6     8.8     6.1     3.5
  Money market securities      8.0     17.4     8.7     2.5     2.3     1.7
  Debt financing liabilities  (4.4)    (9.7)   (9.5)   (2.4)   (1.4)   (1.3)
Real assets
  Real estate                 11.6     25.5    19.9    17.1    10.9     7.0
  Infrastructure               6.1     13.3    11.2     9.5     9.5     5.8

----------------------------------------------------------------------------
Total(2)                     100.0    219.1   183.5   161.8   148.3   127.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
PERFORMANCE
Annual rate of return                  16.5%   10.1%    6.6%   11.9%   14.9%
----------------------------------------------------------------------------
(1)  Equities represented 48.7% of the portfolio or $106.8 billion. That
     amount consisted of 29.9% public equities valued at $65.5 billion and
     18.8% private equities valued at $41.3 billion.
(2)  Excludes non-investment assets such as premises and equipment and non-
     investment liabilities.

Investment Highlights

During fiscal 2014, CPPIB completed 45 transactions of over $200 million each in 11 countries around the world. Highlights for the year include:

Private Investments


--  Entered into a definitive agreement to acquire 100% of the common stock
    of Wilton Re Holdings Limited for US$1.8 billion, together with the
    management of Wilton Re. Wilton Re is a provider of life insurance and
    reinsurance solutions to the U.S. life insurance market.

--  Completed first infrastructure investment in Peru with the acquisition
    of a 36.8% equity stake in Transportadora de Gas del Peru S.A. (TgP),
    the largest transporter of natural gas and natural gas liquids in Peru,
    for a total consideration of approximately US$807 million.

--  Completed the acquisition of luxury retailer Neiman Marcus Group LTD
    Inc., alongside Ares Management, for a purchase price of US$6.0 billion.
    CPPIB and Ares each hold an equal economic interest, with the Company's
    management retaining a minority stake.

Public Market Investments


--  Acquired a 15% interest in ORPEA S.A., one of Europe's leading providers
    of long-term care services, for a total consideration of EUR320.8
    million. Paris-based ORPEA has a unique network of healthcare facilities
    in France, Belgium, Spain, Italy and Switzerland.

--  Invested $170 million for a 24% interest in TORC Oil & Gas Ltd. through
    a private placement. TORC is a Calgary-based oil and gas producer
    focused on light-oil opportunities.

Real Estate Investments


--  Formed a new venture with China Vanke Co., Ltd., the largest residential
    developer in China, to invest in new residential development projects in
    large cities across the country. Through this venture, CPPIB will invest
    over time US$250 million in the Chinese residential market. To seed the
    venture, CPPIB and Vanke are investing in a project located in Qingdao,
    Shangdong Province in China.

--  Formed new real estate ventures in India:
    --  Formed a strategic alliance with the Shapoorji Pallonji Group to
        acquire foreign direct investment-compliant, stabilized office
        buildings in India's major metropolitan centres. CPPIB will own 80%
        of the venture with an initial equity commitment of US$200 million.
    --  Formed a strategic alliance with Piramal Enterprises Limited (PEL)
        to provide structured debt financing to residential projects across
        India's major urban centres. CPPIB and PEL have each initially
        committed US$250 million.

--  Acquired a 27.6% interest in Aliansce Shopping Centers S.A. for an
    equity amount of US$480 million. Based in Rio de Janeiro, Aliansce is
    one of Brazil's top real estate operating companies, focused on the
    ownership, management and development of enclosed shopping centres.

Five and 10-Year Returns(1)
(for the period ending March 31, 2014)

----------------------------------------------------------------------------
                   Investment Rate of  Investment Rate of     Investment
                    Return (Nominal)      Return (Real)        Income(2)
----------------------------------------------------------------------------
5-Year Annualized         11.7%               9.7%           $87.1 billion
----------------------------------------------------------------------------
10-Year Annualized        7.1%                5.1%           $95.1 billion
----------------------------------------------------------------------------
(1)  After CPPIB operating costs.
(2)  Dollar figures are cumulative.

About Canada Pension Plan Investment Board

Canada Pension Plan Investment Board (CPPIB) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits on behalf of 18 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in Hong Kong, London, New York City and Sao Paulo, CPPIB is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At March 31, 2014, the CPP Fund totalled $219.1 billion. For more information about CPPIB, please visit www.cppib.com.

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
SYS-CON Events announced today that Windstream, a leading provider of advanced network and cloud communications, has been named “Silver Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the Javits Center in New York, NY. Windstream (Nasdaq: WIN), a FORTUNE 500 and S&P 500 company, is a leading provider of advanced network communications, including cloud computing and managed services, to businesses nationwide. The company also offers broadband, p...
The 4th International DevOps Summit, co-located with16th International Cloud Expo – being held June 9-11, 2015, at the Javits Center in New York City, NY – announces that its Call for Papers is now open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's large...
"There is a natural synchronization between the business models, the IoT is there to support ,” explained Brendan O'Brien, Co-founder and Chief Architect of Aria Systems, in this SYS-CON.tv interview at the 15th International Cloud Expo®, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Verizon Enterprise Solutions is simplifying the cloud-purchasing experience for its clients, with the launch of Verizon Cloud Marketplace, a key foundational component of the company's robust ecosystem of enterprise-class technologies. The online storefront will initially feature pre-built cloud-based services from AppDynamics, Hitachi Data Systems, Juniper Networks, PfSense and Tervela. Available globally to enterprises using Verizon Cloud, Verizon Cloud Marketplace provides a one-stop shop fo...
Leysin American School is an exclusive, private boarding school located in Leysin, Switzerland. Leysin selected an OpenStack-powered, private cloud as a service to manage multiple applications and provide development environments for students across the institution. Seeking to meet rigid data sovereignty and data integrity requirements while offering flexible, on-demand cloud resources to users, Leysin identified OpenStack as the clear choice to round out the school's cloud strategy. Additional...
The major cloud platforms defy a simple, side-by-side analysis. Each of the major IaaS public-cloud platforms offers their own unique strengths and functionality. Options for on-site private cloud are diverse as well, and must be designed and deployed while taking existing legacy architecture and infrastructure into account. Then the reality is that most enterprises are embarking on a hybrid cloud strategy and programs. In this Power Panel at 15th Cloud Expo (http://www.CloudComputingExpo.com...
We are all here because we are sold on the transformative promise of The Cloud. But what good is all of this ephemeral, on-demand infrastructure if your usage doesn't actually improve the agility and speed of your business? How must Operations adapt in order to avoid stifling your Cloud initiative? In his session at DevOps Summit, Damon Edwards, co-founder and managing partner of the DTO Solutions, will highlight the successful organizational, process, and tooling patterns of high-performing c...
The definition of IoT is not new, in fact it’s been around for over a decade. What has changed is the public's awareness that the technology we use on a daily basis has caught up on the vision of an always on, always connected world. If you look into the details of what comprises the IoT, you’ll see that it includes everything from cloud computing, Big Data analytics, “Things,” Web communication, applications, network, storage, etc. It is essentially including everything connected online from ha...
Software-driven innovation is becoming a primary approach to how businesses create and deliver new value to customers. A survey of 400 business and IT executives by the IBM Institute for Business Value showed businesses that are more effective at software delivery are also more profitable than their peers nearly 70 percent of the time (1). DevOps provides a way for businesses to remain competitive, applying lean and agile principles to software development to speed the delivery of software that ...
Docker offers a new, lightweight approach to application portability. Applications are shipped using a common container format and managed with a high-level API. Their processes run within isolated namespaces that abstract the operating environment independently of the distribution, versions, network setup, and other details of this environment. This "containerization" has often been nicknamed "the new virtualization." But containers are more than lightweight virtual machines. Beyond their small...
The move in recent years to cloud computing services and architectures has added significant pace to the application development and deployment environment. When enterprise IT can spin up large computing instances in just minutes, developers can also design and deploy in small time frames that were unimaginable a few years ago. The consequent move toward lean, agile, and fast development leads to the need for the development and operations sides to work very closely together. Thus, DevOps become...
Cloud Expo 2014 TV commercials will feature @ThingsExpo, which was launched in June, 2014 at New York City's Javits Center as the largest 'Internet of Things' event in the world.

ARMONK, N.Y., Nov. 20, 2014 /PRNewswire/ --  IBM (NYSE: IBM) today announced that it is bringing a greater level of control, security and flexibility to cloud-based application development and delivery with a single-tenant version of Bluemix, IBM's

An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and asse...
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at Internet of @ThingsExpo, James Kirkland, Chief Ar...