Market upswing helps CPP growth

The Canada Pension Plan earned $3.2 billion from investments as markets improved in its latest quarter, but the fund’s managers are ramping up its stake in private holdings to ensure pensions payouts can continue during a downturn. The CPP Investment Board — which manages the fund that will be used to pay out future pension payments — reported Friday that the value of the fund rose to $152.8 billion during its fiscal third quarter on improved equity and bond market returns.

That compares to $152.3 billion at the end of the second quarter and $140.1 billion at the end of the third quarter of fiscal 2011, when the fund’s investments were still recovering from the recession.

“It was a good quarter for the public markets and our returns reflect that as well,” said David Denison, president and CEO of the CPP Investment Board.

The fund garnered $3.2 billion in investment income in the quarter, a 2.1 per cent rate of return.

However, that was slightly offset by $2.6 billion in CPP benefits payouts during the quarter.

The CPP fund usually receives more contributions than are required to pay benefits during the first part of the calendar year and then uses some of those funds to pay benefits at the end of the year.

The sustainability of pension funds has been making headlines lately as the government tries to prepare for a looming pension crisis as baby boomers retire, drawing down funds in the system instead of contributing.

The board was busy investing in privately held assets in the quarter, continuing a trend that has shifted the balance of its portfolio over the past year.

Still, publicly traded stocks make up about 34.4 per cent of its equity portfolio, while private equities are about16.3 per cent — up from15 per cent in the third quarter of last year.

While the board doesn’t have a target for the level of private holdings in its portfolio, a rebalancing to take on a bigger proportion of private holdings is “very much part of our intentional active strategies,” Denison said. The balance helps the fund’s returns to remain resilient against turbulent market conditions, he added.

Denison said the CPPIB has been much more active in private investment deals so far this year than it had earlier expected.