CPPIB posts 3.1% gain for fiscal 2020 after difficult final quarter

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Happy Canada Day Canadian Flag © The Canada Pension Plan Investment Board earned a 3.1 per cent net return for its fiscal 2020 year, which ended March 31.

Rising to $409.6 billion in assets under management, the fund saw $12.1 billion in investment income and $5.5 billion in net contributions. However, the 3.1 per cent return falls short compared to the fund’s 8.9 per cent net gain during fiscal 2019.

While the CPPIB saw steady gains for its first three fiscal quarters, the market turmoil caused by the outbreak of the coronavirus had a significant negative impact on its performance during the final quarter. Notably, on a calendar-year basis, its return was 12.6 per cent for 2019.

Asset performance varied, with Canadian equities posting a negative 12.2 per cent return for the fiscal year. Foreign stocks posted 1.6 per cent gain, while emerging market equities were down 9.1 per cent. In fixed income, marketable government bonds were one of the only assets to perform better than the last fiscal year, with a 16.1 per cent return, while non-marketable government bonds returned 4.7 per cent, largely in line with last year’s performance.

Canadian private equity saw a negative 5.1 per cent performance, while foreign and emerging private equity saw returns of six per cent and eight per cent, respectively, down somewhat from last year. Credit returned 0.5 per cent overall, lagging last year’s gain of 8.7 per cent.

Real assets in energy and resources saw the worst tumble, posting a negative 23.4 per cent return. “There were multiple downward pressures that caused that, including the breakdown of agreements between Russia and Saudi Arabia,” says Michel Leduc, senior managing director and global head of public affairs and communications at the CPPIB. “We also saw an oversupply of the product which drove prices down to historic levels. So it all comes down to a fairly simple thing, which was the shrinkage in the price making it very difficult for the major suppliers to operate at a profit.”

Meanwhile, real estate saw a return of 5.1 per cent, lower than last year’s gain of 6.4 per cent, but still holding its own to a significant degree. “Going into the calendar year, before the pandemic, a lot of these valuations were holding up quite nicely,” says Leduc. “Yes, they’ve been hit, and it may be some time before we see that swoosh effect. But . . . we continue to have conviction that behaviour will evolve and they will hold up in terms of their value and produce good returns.”

As for other real assets, infrastructure gave up one per cent, while power and renewables was the only other asset class to outdo its 2019 performance, yielding a 4.4 per cent return, up from 1.2 per cent in fiscal 2019.

Towards the end of its fiscal year, the CPPIB, like countless other enterprises, found itself mobilizing its resources to maintain its business continuity in the face of the pandemic. Hundreds of employees were suddenly working from home, including trading staff, notes Leduc.

“We moved within a couple of days completely seamlessly. Literally, we went from having nine offices globally, to having 1,800 offices.”

Part of what enabled that smooth transition is that the crisis happened to come soon after a significant boost in internal investment in technology, he adds, including introducing the role of chief technology and data officer, which Kelly Shen was appointed to in late 2018. “It wasn’t necessarily geared towards being prepared to work from home, but the tools we had available to us to be able to move very quickly, for all sorts of different reasons, gave us that agility.”

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