The Canada Pension Plan Investment Board posted a net return of 1.3 per cent for the fiscal year ended March 31, ending the year with net fund assets of $570 billion compared to $539 billion a year earlier.

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The CPP fund has a 10-year net return of 10 per cent.

The $31 billion increase in net assets this year consisted of $8 billion in net income and $23 billion in net transfers from the Canada Pension Plan (CPP).

Net CPP cash flows in fiscal 2023 were higher than usual due to higher employment rates, an increased limit to the year’s maximum pensionable earnings, an increase to additional Canada Pension Plan Investment Board and a lump-sum inflow in the fourth quarter due to forecasting adjustments made by the CPP.

Since its inception in 1999, CPPIB has contributed $386 billion in cumulative net income to the fund.

“Our strong long-term return of 10 per cent over 10 years demonstrates that our active management strategy is on track,” said John Graham, chief executive of the pension investment organization.

“Despite significant declines in global equity and fixed income markets during our fiscal year, our investment portfolio remained resilient, delivering stable returns while outperforming major indexes.”

In an interview, Graham said the fund’s diversification by geography and asset class helped during what was a volatile year, with renewables and some credit portfolios performing well despite challenges in sectors such as real estate and retail.

In private credit, tightening credit conditions resulting from a handful of bank failures and rescues in the United States have opened up opportunities for non-bank players like pension funds, he said.

Meanwhile, global infrastructure deals are beginning to take place without prices being reset, while “price discovery” remains in flux in other areas.

“So we kind of had headwinds and tailwinds in the portfolio, which is the point of diversification,” Graham said.

Ongoing macroeconomic and geopolitical risks are being assessed, and CPPIB intends to continue to pursue an asset split of 80 per cent in developed markets and 20 per cent emerging markets, he said.

There are no immediate plans to make an adjustment to the CPP fund’s investments in China which represent about nine per cent of the portfolio and include direct investments as well as exposure through passive share ownership.

“We do continue to believe that (as) … a global investor that it’s important to invest in the largest, fastest growing economies around the world,” Graham said. “I think it would actually be challenging to understand the global economy without understanding the largest economies within it.”

He described the fund’s investments in China as “surgical,” adding that he is comfortable with the companies and that the majority of the investments are liquid, meaning there is less risk if they needed to be sold.

“The percentage (of investments) is really grounded in what we think the forward looking returns are, but what the forward looking returns will be from a risk adjusted basis, ensuring that we get compensated for the risk,” he said.

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