Canadian public equities led the way as the Canada Pension Plan Investment Board saw a 12 per cent return in its latest fiscal year.
On Thursday, the CPPIB announced the fund saw an increase of $37.8 billion at the end of its fiscal year on March 31, 2017, with net assets of $316.7 billion compared to $278.9 billion at the end of fiscal 2016. The portfolio delivered a gross investment return of 12.2 per cent for fiscal 2017, or 11.8 per cent of net of all costs, according to a release.
Canadian public equities led the way, with a return of 19.2 per cent. Close behind were U.S. and emerging-market public equities at 18.9 per cent. Real estate investments returned 8.3 per cent, while government bonds trailed all other asset classes. The CPPIB’s costs rose to $2.8 billion for the year, up from $2.6 billion the year before.
“This was a strong year for the CPP fund as we achieved one of the largest yearly increases in assets since the inception of CPPIB,” said Mark Machin, president and chief executive officer of the CPPIB. “As always, we continue to focus on longer-term performance.
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“Year-by-year results will swing, but it is noteworthy that our 11.8 per cent five-year return mirrors our annual return. We believe this is a strong indicator of our ability to generate steady, sustainable returns for generations of beneficiaries to come.”
Also on Thursday, Machin said that while the CPPIB would welcome the opportunity to invest in Canadian infrastructure, there’s a limited supply of suitable assets available to purchase, the organization’s head said yesterday.
“If the opportunities were there, we’d love to look at them,” said Machin, speaking to reporters on Thursday. “We’d love to invest in them. It’s just a scarcity of opportunities.”
Machin said the CPPIB is constantly on the hunt for purchases around the world but finds itself frequently outbid by rivals when infrastructure comes on the market. “That’s terrific for governments. It’s terrific for sellers. But when you’re competing to buy, it’s really razor-sharp pricing,” he said. “So we’ve been quite cautious on where we’ve added assets.”
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Machin and CPPIB chief investment strategist Ed Cass said they’d prefer to invest in late-stage or completed infrastructure projects rather than fresh developments that need approval and to be built before they generate cash flow.
Cass said the new federal infrastructure bank will be able to package opportunities for late-stage investors after going through the earlier steps.
But Machin said the CPPIB faces no political pressure to invest in Canada or the infrastructure bank, because the fund has a clear mandate to maximize investment returns and operates at arm’s length from all levels of government.
“We’re shielded from anything along those lines,” said Machin.