August 14, 2019 - 8:00 AM EDT
Print Email Article Font Down Font Up
CPP Fund Totals $400.6 Billion at First Quarter Fiscal 2020

Canada NewsWire

Highlights:

  • Net assets surpass $400 billion
  • 10-year and five-year returns of 10.5% each
  • $4.1 billion in net income generated for the Fund this quarter

All figures in Canadian dollars unless otherwise noted.

TORONTO, Aug. 14, 2019 /CNW/ - Canada Pension Plan Investment Board (CPPIB) ended its first quarter of fiscal 2020 on June 30, 2019, with net assets of $400.6 billion, compared to $392.0 billion at the end of the previous quarter.

Canada Pension Plan Investment Board (CNW Group/Canada Pension Plan Investment Board)

The $8.6 billion increase in assets for the quarter consisted of $4.1 billion in net income after all CPPIB costs and $4.5 billion in net Canada Pension Plan (CPP) contributions.

The Fund, which includes the combination of both the base CPP and additional CPP accounts, achieved 10-year and five-year annualized net nominal returns of 10.5% each. For the quarter, the Fund returned 1.1% net of all CPPIB costs. 

"CPPIB's investment programs performed well in the first quarter, achieving solid net income in local-dollar terms," says Mark Machin, President & Chief Executive Officer, CPPIB. "At the same time, the strengthening of the Canadian dollar against all major currencies in June dampened our returns overall, as the market responded to lower interest rate expectations in the U.S. and Europe."

The Total Portfolio Management department was the top contributor, in part due to gains in fixed income investments. Both the Private Equity and Active Equities departments also delivered positive results, supported by the improved sentiment in global equity markets.

CPPIB continues to build a portfolio designed to achieve a maximum rate of return without undue risk of loss, taking into account the factors that may affect the funding of the CPP and the CPP's ability to meet its financial obligations. The CPP is designed to serve today's contributors and beneficiaries while looking ahead to future decades and across multiple generations. As a comparative advantage, an extended investment horizon helps to define CPPIB's strategy and risk appetite. Accordingly, long-term results are a more appropriate measure of CPPIB's investment performance compared to quarterly or annual cycles.

Fund Five and 10-Year Returns1, 2, 3

(for the quarter ending June 30, 2019)


Investment Rate of Return
(Nominal)

Net Income4

Five-Year Annualized

10.5%

$152.7 billion

10-Year Annualized

10.5%

$235.6 billion

1 

After all CPPIB costs.

2 

Rates of return are calculated on a time-weighted basis.

3

Includes both base and additional CPP.

4

Dollar figures are cumulative.

 

Performance of the Base and Additional CPP Accounts
The base CPP account ended its first quarter of fiscal 2020 on June 30, 2019 with net assets of $399.7 billion, compared to $391.6 billion at the end of fiscal 2019. The $8.1 billion increase in assets consisted of $4.1 billion in net income after all costs and $4.0 billion in net base CPP contributions. The base CPP account achieved a 1.1% net return for the quarter.

The additional CPP account ended its first quarter of fiscal 2020 on June 30, 2019 with net assets of $0.9 billion, compared to $0.4 billion at the end of fiscal 2019. The $0.5 billion increase in assets consisted of $0.01 billion in net income and $0.5 billion in net additional CPP contributions. The additional CPP account achieved a 1.5% net return for the quarter.

Long-Term Sustainability
Every three years, the Office of the Chief Actuary of Canada conducts an independent review of the sustainability of the CPP over the next 75 years. In the most recent triennial review, the Chief Actuary of Canada reaffirmed that, as at December 31, 2015, the base CPP remains sustainable at the current contribution rate of 9.9% throughout the forward-looking 75-year period covered by the actuarial report. 

The Chief Actuary's projections are based on the assumption that, over the 75 years from 2015, the base CPP investments will earn an average annual rate of return of 3.9% above the rate of Canadian consumer price inflation, after all investment costs and CPPIB operating expenses. The corresponding assumption is that the additional CPP investments will earn an average annual real rate of return of 3.55%.

The Fund, combining both the base CPP and additional CPP accounts, achieved 10-year and five-year annualized net real returns of 8.6% and 8.8%, respectively.

 

Asset Mix





For the quarter ending June 30, 2019

($ billions)                                                 






$

%



 

Public Equities





  Canadian

8.1

2.0



  Foreign

83.9

20.9



  Emerging

39.5

9.9




131.5

32.8



 

Private Equities





  Canadian

1.0

0.3



  Foreign

81.9

20.4



  Emerging

12.6

3.2




95.5

23.9



 

Government Bonds





  Non-marketable

22.0

5.5



  Marketable

66.6

16.6




88.6

22.1



 

Credit Investments

39.4

9.9



 

Real Assets





  Real Estate

47.0

11.7



  Infrastructure

33.1

8.3



  Energy and Resources

9.6

2.4



  Power and Renewables

5.2

1.3




94.9

23.7



External Debt Issuance

(31.3)

(7.8)



Cash and Absolute Return Strategies1

(18.3)

(4.6)



Net Investments

400.3

100.0



Non-investment assets2

0.3

-



Net Assets3

400.6

-



1

The negative balance of $18.3 billion in Cash & Absolute Return Strategies represents the net amount of financing through derivatives and repurchase agreements, and the current net position from Absolute Return Strategies.

2

Includes assets such as premises and equipment and non-investment liabilities.

3

Includes $399.7 billion of base CPP and $0.9 billion of additional CPP.

 

Operational Highlights:

  • In June 2019, we opened a workspace in San Francisco to better access investment opportunities and deepen relationships within the technology ecosystem. Professionals from investment departments such as Private Equity and Active Equities will be represented in this location. This office becomes the ninth global location for CPPIB and our second U.S. location after New York, which opened in 2014.

  • We built upon the enhanced Integrated Risk Framework introduced in fiscal 2019 to implement an additional set of risk limits that cover both financial and non-financial risks. The Integrated Risk Framework together with the related new risk limits provide a fuller representation and enhanced governance over the different dimensions of the various risks that we are managing. The new risk limits do not materially change the level of risk the Fund is exposed to. 

Q1 Investment Highlights:

Private Equity

  • As part of a consortium, agreed to terms of a recommended offer to purchase Merlin Entertainments plc at a price of 455 pence per share in cash for the entire issued, and to be issued, share capital of Merlin, other than shares already owned by consortium partner KIRKBI. Merlin is a global leader in location-based family entertainment.

  • Closed a transaction to invest an incremental £95 million in Visma, a leading provider of business management software and services in the Nordic and Benelux regions, increasing total investment to £200 million, and ownership to 4.7%.

Real Assets

  • Established Maple Power, a 50/50 Joint Venture with Enbridge, to invest in offshore wind projects in Europe at various stages of development following an initial transaction to purchase renewable power assets from Enbridge in 2018. 

  • Signed a Memorandum of Understanding with Piramal Enterprises to co-sponsor a Renewables InvIT that will acquire operating renewable assets in India. We will hold a majority stake, with an initial target investment of approximately $300 million, with Piramal and other long-term investors holding the remaining interest.

Credit Investments

  • Acquired a portion of LifeArc's royalty interests on worldwide sales of Keytruda® (pembrolizumab) for approximately US$1.3 billion. Keytruda is an anti-PD-1 therapy developed and commercialized by Merck (known as MSD outside the U.S. and Canada).

Active Equities

  • Invested $200 million in Premium Brands Holdings, for an ownership stake of approximately 7.1%. Premium Brands is a leading producer, marketer and distributor of specialty food products in Canada and the U.S.

Asset Dispositions

  • Agreed to sell Acelity Inc. for a total value of approximately US$6.725 billion alongside our consortium of Apax Partners and the Public Sector Pension Investment Board. Acelity is a leader in negative pressure wound therapy, specialty surgical and advanced wound dressing products.

  • Agreed to vote in favour of the acquisition of Advanced Disposal Services, in which we have a 19% stake, by Waste Management. The transaction is subject to customary closing conditions, and net proceeds are expected to be US$549 million. Advanced Disposal provides waste collection, disposal and recycling services in the United States.

Transaction highlights following the quarter end include:

  • As part of a consortium, announced our agreement to merge the Refinitiv business, one of the world's largest providers of financial markets data and infrastructure, with the London Stock Exchange Group plc in an all-share transaction for a total enterprise value of approximately US$27 billion.

  • Agreed to acquire a stake in Waystar, a leading cloud-based provider of revenue cycle technology, alongside the EQT VIII Fund, which values the business at US$2.7 billion. The seller, Bain Capital, will retain a minority stake in the company.

  • Agreed to invest A$136 million, as part of the Dexus Office Trust Australia (DOTA) partnership, to acquire office buildings in Sydney, Australia including 3 Spring Street and a portion of 58 Pitt Street.

  • Completed the sale of our 40% stake in Solveig Gas HoldCo A/S, a company that held a 25.6% stake in Gassled, a natural gas transport network in Norway. 

  • Announced plans to sell Liberty Living, a wholly-owned student accommodation business, to the Unite Group plc for cash proceeds of approximately $1.3 billion, retaining a 20% share in the combined group.

  • IndInfravit Trust, in which CPPIB is a founding investor, has agreed to purchase the entire equity shareholding in nine Indian operational road projects from Sadbhav Infrastructure Project Ltd. The transaction values 100% of the portfolio at an enterprise value of approximately INR 66,100 million. IndInfravit Trust is an infrastructure investment trust based in India.

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 in the best interest of 20 million contributors and beneficiaries. In order to build diversified portfolios of assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney. CPPIB is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At June 30, 2019, the CPP Fund totalled $400.6 billion. For more information about CPPIB, please visit www.cppib.com or follow us on LinkedIn, Facebook or Twitter.

Disclaimer
Certain statements included in this press release constitute "forward-looking information" within the meaning of Canadian securities laws and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United States safe harbors. All such forward-looking statements are made and disclosed in reliance upon the safe harbor provisions of applicable United States securities laws.  Forward-looking information and statements include all information and statements regarding CPPIB's intentions, plans, expectations, beliefs, objectives, future performance, and strategy, as well as any other information or statements that relate to future events or circumstances and which do not directly and exclusively relate to historical facts. Forward-looking information and statements often but not always use words such as "trend," "potential," "opportunity," "believe," "expect," "anticipate," "current," "intention," "estimate," "position," "assume," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" and similar expressions. The forward-looking information and statements are not historical facts but reflect CPPIB's current expectations regarding future results or events. The forward-looking information and statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including available investment income, intended acquisitions, regulatory and other approvals and general investment conditions. Although CPPIB believes that the assumptions inherent in the forward-looking information and statements are reasonable, such statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. CPPIB does not undertake to publicly update such statements to reflect new information, future events, and changes in circumstances or for any other reason. The information contained on CPPIB's website, LinkedIn, Facebook and Twitter are not a part of this press release.

SOURCE Canada Pension Plan Investment Board

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/August2019/14/c8437.html

Darryl Konynenbelt, Director, Global Media Relations, T: +1 416 972 8389, [email protected] CNW Group 2019


Source: Canada Newswire (August 14, 2019 - 8:00 AM EDT)

News by QuoteMedia
www.quotemedia.com

Legal Notice