CPP Investment Board posts 8.9% return for 2018-19, adds $35.9B to assets

TORONTO — Canada Pension Plan Investment Board recovered from a weak quarter in late 2018 to produce a solid 8.9 per cent net return for its most recent financial year.

The Toronto-based investment manager for the Canada Pension Plan announced Wednesday that its CPP Fund had $392.0 billion of net assets as of March 31, up $35.9 billion from the end of the 2018 financial year after all costs.

The fiscal fourth quarter also showed a recovery from a weak return of 1.1 per cent in the third quarter that was affected by a general downturn in stock markets in December.

“Pretty satisfying results for the year. And the long-term results are pretty solid as well,” CPPIB chief executive Mark Machin said in an interview at CPPIB’s head office in downtown Toronto.

CPPIB’s five-year real rate of return, which adjusts for inflation, was 8.9 per cent as of March 31 while the 10-year real rate of return was 9.2 per cent.

Those returns are well ahead of what the Chief Actuary of Canada has determined to be necessary to sustain the Canada Pension Plan to at least 2090.

“We’re quite happy with the 10-year (performance) but not quite sure we’ll see the same returns for the next 10 years.”

One thing that Machin is watching is the tense trade negotiations between the United States and China, which have hit each other with higher tariffs on billions of dollars worth of trade between the No. 1 and No. 2 global economies.

“It would be wonderful if there is a cooling of the tensions (but) it looks like it’s going in the opposite direction right now,” Machin said.

He said China’s growth had already begun to slow last year before the trade war began and then “hit a wall” last summer following an increase in U.S. imposed tariffs on imported goods from China.

One impact on CPPIB was a decline in investment opportunities in China because private-sector companies lowered their ambitions … . So there wasn’t a lot of big capital raises from that time onwards.”

The most recent major China deal announced by CPPIB was in June 2018, when it agreed to invest about US$600 million in Ant International Co., Ltd., a Chinese financial technology company.

However, Machin said that CPPIB did use the late-2018 dip in public markets as an opportunity to make significant investments in some the large publicly traded Chinese technology companies in December.

“We did well out of that in the first quarter of this year.”

As for the United States, Machin said its economy continues to grow “and it’s difficult to see — other than external pressures — what’s going to tip it over… . It’s quite remarkable.”