CPP Fund Totals $278.9 Billion at 2016 Fiscal Year-End
10-Year Milestone of Active Management Active Strategy Delivers $17.1 Billion of Cumulative Net Dollar Value-Added
(firmenpresse) - TORONTO, ONTARIO -- (Marketwired) -- 05/19/16 -- All figures in Canadian dollars unless otherwise noted.
The CPP Fund ended its fiscal year on March 31, 2016 with net assets of $278.9 billion compared to $264.6 billion at the end of fiscal 2015. The $14.3 billion increase in assets for the year consisted of $9.1 billion in net investment income after all CPPIB costs and $5.2 billion in net CPP contributions. The portfolio delivered a gross investment return of 3.7% for fiscal 2016, or 3.4% net of all costs.
"It has now been a decade since we adopted our active management strategy. This milestone presents a reasonable timeframe to take stock of our progress to date, as we position the organization to maximize returns over the long run," said Mark Wiseman, President & Chief Executive Officer, CPP Investment Board (CPPIB). "The value that we have generated over and above our passive benchmark for the decade, as well as our absolute 10-year return, signal that CPPIB is on track to continue to perform. Nonetheless, as a long-term investor, it is incumbent that we remember that even 10 years is short in the context of our strategies to create value-building growth for multiple generations of beneficiaries. Some of our active management programs have only taken root recently, as we continue to build the required capabilities to continue to add value over the long term. We believe that the advanced maturity of our programs, and the quality and diversification of the assets in the portfolio, will generate even greater value-add in the decades ahead."
In the 10-year period up to and including fiscal 2016, CPPIB has contributed $125.6 billion in cumulative net investment income to the Fund after all CPPIB costs, and $160.6 billion since inception in 1999, meaning that over 57% of the Fund''s cumulative assets are the result of investment income.
"Over the past twelve months, despite one of the more challenging investment environments in recent years and predominately negative equity markets, the CPP Fund generated a moderate gain. This outcome demonstrates the benefits of a resilient, highly diversified global portfolio. This year''s results highlight the real-time impact of short-term market volatility, reinforcing why we focus on long-term results," said Mr. Wiseman. "In particular, we saw a stark contrast between the significant upswing in the final quarter of fiscal 2015 compared to the broad declines in the same quarter this fiscal year. We experienced similar quarter-to-quarter volatility in terms of currency impact, which fluctuated dramatically over the year. Importantly, we look through such volatility, relentlessly focusing on the far horizon."
A number of other factors contributed to CPPIB''s strong fiscal 2016 results, including an overall gain from the portfolio''s private equity assets, real estate and fixed income holdings. The benefit of the Fund''s diversification across currencies also played a role in its returns, as the Canadian dollar fell modestly against most global currencies over the course of the fiscal year.
"This year, each of our investment programs fired on all cylinders, contributing positive returns to the Fund. We continued to see the benefits of a broadly diversified portfolio across geographies and asset classes, and our private assets served as a safe harbour from the rough seas of the public markets," said Mr. Wiseman. "Our highly skilled professionals across CPPIB''s international offices completed a number of complex global transactions that will add value to the Fund for the years to come."
The CPP Fund is a global portfolio that holds assets denominated in many foreign currencies and we generally do not hedge these back to the Canadian dollar. Accordingly, when the Canadian dollar weakens as it did in 2015, the Fund will benefit from currency gains. Similarly, when the Canadian dollar strengthens, as it has more recently, the Fund will experience currency losses. The Fund''s largest foreign currency exposure is to the U.S. dollar. The Canadian dollar weakened by 2.1% against the U.S. dollar in fiscal 2016. We believe costly hedging of foreign investments is not appropriate for the CPP Fund. While currency exchange rate fluctuations may have a significant impact on our results in any given year or quarter, we do not expect them to have a significant impact on the Fund''s long-term performance.
Long-Term Sustainability
The Canada Pension Plan''s multi-generational funding and liabilities give rise to an exceptionally long investment horizon. To meet long-term investment objectives, CPPIB is building a portfolio and investing in assets designed to generate and maximize long-term, risk-adjusted returns. Accordingly, long-term investment returns are a more appropriate measure of CPPIB''s performance than returns in any given quarter or single fiscal year.
In the most recent triennial review released in December 2013, the Chief Actuary of Canada reaffirmed that, as at December 31, 2012, the CPP remains sustainable at the current contribution rate of 9.9% throughout the 75-year period of his report. The Chief Actuary''s projections are based on the assumption that the Fund will attain a prospective 4.0% real rate of return, which takes into account the impact of inflation. CPPIB''s 10-year annualized net nominal rate of return of 6.8%, or 5.1% on a real rate of return basis, was comfortably above the Chief Actuary''s assumption over this same period. These figures are reported net of all CPPIB costs to be consistent with the Chief Actuary''s approach.
The Chief Actuary''s report also indicates that CPP contributions are expected to exceed annual benefit payments until 2023, after which a portion of the investment income from CPPIB will be needed to help pay pensions.
Performance Against Benchmark
CPPIB measures its performance against a market-based benchmark, the Reference Portfolio, representing a passive portfolio of public market investments that can reasonably be expected to generate the long-term returns needed to help sustain the CPP at the current contribution rate.
In fiscal 2016, the CPP Fund''s net return of 3.4% outperformed the Reference Portfolio by 4.4%, delivering $11.2 billion in net dollar value-added (DVA) above the Reference Portfolio''s return, after all CPPIB costs.
Given our long-term view, we track cumulative value-added returns since the April 1, 2006, inception of the benchmark Reference Portfolio. Cumulative value-added over the past 10 years totals $17.1 billion, after all CPPIB costs.
"In addition to a strong focus on total Fund returns, dollar value-added is another important performance measure," said Mr. Wiseman. "In the first 10 years of our active management strategy, we have generated significant value for CPP contributors and beneficiaries, which would not have been earned through a passive portfolio. Looking towards the next 10 years, we expect both good and bad years, but we will stay the course with our prudent and responsible long-term strategy. So, while we saw exceptional value-add above our benchmark in fiscal 2016, we know that this will not always be the case in any one-year period."
Total Costs
CPPIB total costs for fiscal 2016 consisted of $876 million, or 32 basis points, of operating expenses, $1,330 million of investment management fees and $437 million of transaction costs. CPPIB reports on these distinct cost categories, as each is materially different in purpose, substance and variability. We report the investment management fees and transaction costs we incur by asset class and report the net investment income our programs generate after deducting these fees and costs. We then report on total Fund performance net of these fees and costs, as well as CPPIB''s overall operating expenses.
Fiscal 2016 CPPIB operating expenses reflect higher personnel and general operating expenses, such as increased staff levels and premises costs related to our headquarters and six international offices. It also reflects the continued expansion of CPPIB''s operations and further development of our capabilities to support over 25 distinct investment programs. International operations accounted for approximately 30% of total operating expenses.
Fiscal 2016 investment management fees and transaction costs reflect the continued growth in the volume and sophistication of our investing activities.
The increase in investment management fees is due in part to the continued growth in the level of commitments and the average level of assets with external managers, as the Fund continues to grow.
The increase in transaction costs corresponds with a significant increase in investment activity. This year, we completed 10 global transactions valued at over $1 billion, each involving complex due diligence and negotiations, as we worked diligently to deploy capital efficiently. Given the nature of these costs, they will vary from year to year according to the number, size and complexity of our investing activities in any given period.
Portfolio Performance by Asset Class
Portfolio performance by asset class is included in the table below. A more detailed breakdown of performance by investment department is included in the CPPIB Annual Report for fiscal 2016, which is available at .
Asset Mix
We continued to diversify the portfolio by the return-risk characteristics of various assets and geographies during fiscal 2016. Canadian assets represented 19.1% of the portfolio, and totalled $53.3 billion. Foreign assets represented 80.9% of the portfolio, and totalled $225.8 billion.
Investment Highlights
During fiscal 2016, CPPIB completed 60 transactions of over $200 million each, in 12 countries around the world. Highlights for the year include:
(for the period ending March 31, 2016)
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 on behalf of 19 million contributors and beneficiaries. In order to build a diversified portfolio of CPP 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 and Sao Paulo, CPPIB is governed and managed independently of the Canada Pension Plan and at arm''s length from governments. At March 31, 2016, the CPP Fund totalled $278.9 billion. For more information about CPPIB, please visit or follow us on or .
Contacts:
CPP Investment Board
Dan Madge
Senior Manager, Media Relations
+1 416 868 8629
CPP Investment Board
Mei Mavin
Director, Corporate Communications
+44 20 3205 3515
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Datum: 19.05.2016 - 11:00 Uhr
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