CANADA - The Canada Pension Plan (CPP) fund grew to C$98bn in the year ending 31 March 2006, with 85% of the fund's gains attributed to exceptional equity market performance over the period.
Canadian equity holdings generated an overall rate of return of 29.9%, generated by the energy and financial services sectors in particular.
The fund’s growth was an increase of $16.7bn from $81.3bn the previous year. It also included $13.1bn in investment gains and $3.6bn in additional contributions.
The CPP achieved a 15.5% return, compared to 8.5% for the previous year and a 14.9% median return for Canadian pension plans over the same period.
The near-term asset-mix target of the CPP Investment Board was revised at the start of fiscal 2006 [1 April 2005] to 60% equity, 30% fixed income and 10% real return assets.
At 31 March 2006, equities totalled $61.7bn or 63%, consisting of publicly traded stocks valued at $57.3bn, or 58.5% of the total fund, plus private equity valued at $4.4bn, 4.5%.
The fixed income component comprised of government bonds and money market securities totalling $27.8bn, 28.3%, while real return assets represented $8.5bn, 8.7%.
This consisted of real estate valued at $4.2bn, or 4.3% of the fund, inflation-linked bonds valued at $4bn, 4%, and infrastructure investments valued at $350m, 0.4%.
David Denison, president and CEO of the CPP Investment Board said the fiscal year’s key investment goal had been to further diversify the portfolio by risk/return attributes and geography.
“As a result we increased our investments in real estate, inflation-linked bonds and infrastructure to $8.5bn, or 8.7% of the overall portfolio, from just $1bn or 1.2% at the beginning of the year,” he said. “Given that we have $63bn invested in Canada, we will continue to seek additional international investments because they help reduce concentration risk and over-dependence of the CPP on the domestic economy.”
Based on actuarial projections, CPP contributions are expected to exceed benefits until 2022, providing a 16-year period before a portion of the investment income is needed to help pay benefits.
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