CPP board projects lower returns amid sluggish global growth
TORONTO The head of the Canada Pension Plan Investment Board said Thursday that investors are likely to see weaker returns in the future amid a “pretty sluggish period” that has struck most global economies.
“I think we’re going to see much lower return on assets going forward than we have since the global financial crisis and the recovery,” said Mark Machin, president and chief executive of the CPPIB. “So I would see returns coming down around the world.”
The CPPIB reported on Thursday net assets of $368.5 billion for its quarter ended Dec. 31, up $200 million from the end of the previous quarter. The pension fund also said its investment portfolio posted a net return of 1.1 per cent for the three months, which included the period of volatility that struck the markets in late 2018.
“It was a solid quarter given a pretty weak market environment,” Machin said. “The fact that our portfolio held up pretty well during that shows that diversification works.”
It also reported its investment portfolio notched 10year and five-year annualized returns of 10 per cent and 11 per cent, net of all its costs.
CPPIB announced a number of investments during the quarter, including paying $670 million with a partner for a controlling stake in a hydro-power company in Brazil, which was one of the few countries “desynchronized” from the global economic slowdown, Machin said.
The complex situations involving Canada, China and the United States are contributing to those growth issues, Machin said, although he remained optimistic about a resolution.
“It’s a very significant drag on global growth right now,” he added. “Because uncertainty holds people back from making investments in their businesses, and may hold people back from hiring people, and it holds people back from taking risk in their business.”