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CPP Fund valued at $127.7 billion as of June 30, 2008
Toronto (August 14, 2008) – The Canada Pension Plan (CPP) Fund ended the first quarter of fiscal 2009 on June 30, 2008 at $127.7 billion compared to $122.7 billion at fiscal 2008 year end. The $5.0 billion increase in assets after operating expenses this quarter consisted primarily of $1.3 billion in investment income, reflecting a 1 per cent investment rate of return for the quarter, and $3.8 billion in CPP contributions not needed to pay current pension benefits.
“Financial markets had a positive impact on the investment portfolio overall this quarter, as Canadian equity markets rose 8.6 per cent on the strength of higher commodity prices and energy stocks, which more than offset a decline of 3.4 per cent in other markets due to the ongoing effects of the credit crisis,” said David Denison, President and CEO, CPP Investment Board.
The CPP Investment Board reflects its long investment horizon by regularly reporting rolling four-year performance. The four-year annualized investment rate of return through June 30, 2008 was 9.3 per cent, which has added $33.7 billion in investment income to the CPP Fund over that four-year period and is well above the 4.2 per cent real return required to sustain the Canada Pension Plan at its current contribution rate.
At June 30, 2008, equities represented 62.0 per cent of the fund or $79.2 billion. That amount consisted of 51.0 per cent public equities valued at $65.1 billion and 11.0 per cent private equities valued at $14.1 billion. Fixed income, including bonds, money market securities, and other debt represented 25.8 per cent of the portfolio or $32.9 billion. Inflation-sensitive assets represented 12.2 per cent or $15.6 billion. Of those assets, 5.6 per cent consisted of real estate valued at $7.2 billion, 4.0 per cent was inflation-linked bonds valued at $5.1 billion, and 2.6 per cent was infrastructure valued at $3.3 billion.
Long-term Sustainability
CPP contributions are expected to exceed annual benefits paid through to the end of 2019, providing a 12-year period before a portion of the investment income is needed to help pay CPP benefits. The Chief Actuary of Canada estimates that a 4.2 per cent real rate of return, over a long-term period, is required to sustain the plan at the current contribution rate. The Chief Actuary has projected that the CPP, as constituted, is sustainable throughout the 75-year period of his report. According to his estimates, the CPP Fund will grow to approximately $310 billion by the end of 2019, making it one of the largest single purpose pools of investment capital in the world, thereby helping to secure the CPP for the long term.