The Canada Pension Plan (CPP) fund ended the third quarter of fiscal 2011 on Dec. 31, 2010 at $140.1 billion, a $1.5 billion jump from the end of the second quarter.
The increase represents investment income of $3.9 billion—a 3% return—less seasonal cash outflows of $2.4 billion to pay CPP benefits.
“We are pleased with the continued positive performance of the CPP fund,” said David Denison, president and CEO with the CPP Investment Board. “This quarter’s results were primarily due to a continued uptrend in the global equity markets.”
For the five-year period ending Dec.31, 2010, the fund had an annualized investment rate of return of 3.5%, or $20.1 billion. For the 10-year period ending Dec. 31, 2010, the fund generated $47.1 billion of investment income, an annualized rate of return of 5.6%.
Portfolio update
The CPPIB has announced an array of sizeable and complex investments in private equity, real estate and infrastructure through the first nine months of its current fiscal year.
“One of the investment highlights was the completion of the Tomkins plc acquisition alongside Onex Corporation, which was the largest private equity transaction globally in calendar 2010,” Denison said. “This marks the second consecutive year that CPPIB has participated in the largest global private equity transaction, as our investment in IMS Health Inc. alongside TPG Capital was the largest in 2009.”
Other investments include the purchase of a 10% stake in 407 ETR from CintraInfraestructuras S.A. for $894 million; an equity investment of $487 million for the acquisition of a 25% interest in Westfield Stratford City, a major retail and entertainment development adjacent to the 2012 London Olympics site; and a $93 million joint venture with U.S. REIT Vornado Realty Trust to invest in two prime office buildings in Washington, D.C.
Long-term sustainability
In November 2010, the Chief Actuary of Canada reaffirmed through his triennial review that the CPP remains sustainable at the current contribution rate of 9.9% throughout the report’s 75-year period.
The report also indicates that CPP contributions are expected to exceed annual benefits paid until 2021, providing a 10-year period before a portion of the investment income from the CPPIB will be needed to help pay pensions.