Canada’s biggest public pension fund, CPP Investments, has chalked up a net return of 1.3% for the fiscal year to end-March with assets increasing by 5.8% to C$570 billion (US$422 billion).
Results were undermined by “significant declines” in stocks and fixed income as a result of high inflation and rising interest rates. Yet, the traditional inflation-hedge of infrastructure performed well, and there were robust returns on private equity and credit assets held in US currency. An additional boost came from the depreciation of the Canadian dollar against the US dollar and other hard currencies, delivering a foreign currency gain of C$25 billion (US$18.5 billion).
The fund achieved a one-year value-added of C$2 billion (US$1.5 billion), 1.3% above reference portfolios and its net return still beat its internal benchmark of 0.1%. Its 10-year annualized net return reached 10%.
CPP’s US assets, which represent 36% of assets under management, were the best performing in FY2023 with a one-year return of 3.6% and a five-year average of 9.8%. Yet, it is hiking its exposure to emerging markets, which were 22% of the portfolio equating to around C$123 billion (US$91 billion), mostly in Asia-Pacific and Latin America. These investments generated a five-year annualized net return of 5.4%.
Net assets in India rose 11% to INR1.3 trillion (US$12 billion) in FY2023, across all asset classes. Some of its main Indian investments were over the year included ramping up investment in the road network via Indinfravit Trust (in which CPP holds a 46% stake) and upping its stake in leading renewables company ReNew Energy to 51.6% to assist with its transformation from an independent generator to establishing a presence throughout the supply chain. It has also invested in the Kotak Infrastructure Investment Fund, which will provide senior and secured financing to operating infrastructure projects in India, and IndoSpace Logistics Park.
The move into India was accompanied by exits from China, where it sold six logistics warehouses in the Goodman China Logistics Partnership (GCLP) as well as joining the exodus from Shanghai-listed A-shares.
CPP has recently seen significant churn in top-level personnel in the best performing asset classes, private equities and infrastructure.Last month it was reported that CPP’s head of funds and secondaries, Delaney Brown, a managing director, was stepping down from his role. His 40-strong team, split over Toronto, London and San Francisco, are responsible for investing in funds and secondaries in North America and Europe. CPP had a private equity exposure of C$190 billion (US$140 billion) in FY2023, according for a third of its portfolio. Private equity returned 6.8% in FY2023 with a five-year annual average of 14.8%.
The announcement of Brown’s planned departure was followed by news this month that Scott Lawrence left CPP as head of infrastructure, replaced by James Bryce. Bryce joined CPI in 2012 and served as head of the portfolio value creation team. He takes the helm of a portfolio worth around C$51 billion (US$38 billion), which reported a 5.6% annual return in FY2023 and a five-year return of 8.1%.
