At the close of fiscal year 2021, the Canada Pension Plan Investment Board posted the highest net return since its inception.
On May 20, 2021, the Canada Pension Plan Investment Board (CPPIB) released its annual report for the fiscal year that ended on March 31, 2021. It announced it finished the fiscal year with net assets totalling $497.2 billion, compared to $409.6 billion at the end of fiscal 2020. This represented a 20.4 per cent return net of all costs (compared to 3.1 per cent in 2020), the highest return since the inception of the CPPIB. This increased the 10-year annualized return to 10.8 per cent and the five-year annualized return to 11 per cent, outpacing the Chief Actuary’s targets for the plan’s health and sustainability.
According to the recently appointed president and CEO of the CPPIB, John Graham, “the fund performed exceptionally well in fiscal 2021, with all investment departments capitalizing on improving global equity markets following the steep declines observed at the end of fiscal 2020. The fiscal year was bookended by extremes, with markets reaching new record highs following the significant lows just 12 months earlier.”
Federal Retirees was invited to participate in CPPIB’s fourth annual Stakeholder Day on June 1, where the fund’s senior leadership dove into details on the CPPIB’s annual report and shared perspectives on the fund’s performance and the view forward for CPPIB.
Graham noted the CPPIB’s long-term performance continues on a positive trajectory thanks in good part to the fund’s active management strategy, which has been in play and enhancing the plan’s performance since 2005.
The strong returns this past year were led by bounce back years for Canadian public equities (-12.2per cent in 2020 vs. 40.8per cent in 2021), foreign public equities (1.6per cent in 2020 vs. 29.1per cent in 2021), emerging market public equities (-9.1per cent in 2020 vs. 34.0per cent in 2021), with similar results in private equities and real assets such as a significant turn for energy and resources (-23.4per cent in 2020 vs. 45.8per cent in 2021).
It’s not all dollars and cents, though. The CPPIB, like many large institutional and global investors, are keenly aware of the issues that impact the bottom line, like tensions with China and U.S. trade policy, the impact of climate change and environmental-social-governance (ESG) investment factors, and the spectre of an Alberta pension plan.
With respect to the idea floated by Alberta premier Jason Kenney to hive off Albertans’ CPP into a made-in-province solution – the CPPIB emphasized their independence from political interference and the unique risk pooling they can offer as a fully national plan focused on delivering retirement income security to all Canadians. Strength in numbers means better protection from things like demographic challenges and other issues that can challenge smaller plans and populations.
For more information, including the operational highlights of the year, read the full report.