All figures in Canadian dollars unless otherwise
noted.
Highlights1:
- Net assets increase by $62.3
billion
- Net annual return of 8.0%
- 10-year net return of 9.2%
- Cumulative net income of $432.4
billion since inception in 1999
TORONTO, May 22, 2024
/CNW/ - Canada Pension Plan Investment Board (CPP Investments)
ended its fiscal year on March 31,
2024, with net assets of $632.3
billion, compared to $570.0
billion at the end of fiscal 2023. The $62.3 billion increase in net assets consisted of
$46.4 billion in net income and
$15.9 billion in net transfers from
the Canada Pension Plan (CPP).
The Fund, which includes the combination of the base CPP and
additional CPP accounts, achieved a net return of 8.0% for the
fiscal year. Since the CPP is designed to serve multiple
generations of beneficiaries, evaluating the performance of CPP
Investments over extended periods is more suitable than in single
years. The Fund returned a 10-year annualized net return of 9.2%.
Since its inception in 1999, CPP Investments has contributed
$432.4 billion in cumulative net
income to the Fund.
"The CPP Fund's growth this year continued the trend of reaching
heights several years ahead of initial actuarial projections," said
John Graham, President & CEO.
"Solid performance by all of the investment departments and key
corporate functions helps demonstrate how our strategy is on
track."
Annual results were positively impacted by strong public equity
market performance, gains in our private equity portfolio, as well
as investments in credit, infrastructure and energy. This was
offset by overall weaker performance of emerging markets compared
to developed markets and lower performance of real estate
assets.
"Since the creation of CPP Investments 25 years ago, we have
made a number of strategic decisions that have generated
significant value above initial projections, with investment
returns comprising more than two-thirds of total Fund assets to
date," added Graham. "As we head into our next quarter century, we
are mindful of continuing geopolitical and economic uncertainties
that may affect the investment environment, however, we have strong
conviction that our people and our strategy will allow us to
continue to deliver on our mandate for generations to come."
Performance of the Base and Additional CPP
Accounts
The base CPP account ended the fiscal year on
March 31, 2024, with net assets of
$593.8 billion, compared to
$546.2 billion at the end of fiscal
2023. The $47.6 billion increase in
net assets consisted of $44.4 billion
in net income and $3.2 billion in net
transfers from the CPP. The base CPP account achieved an 8.1% net
return for the fiscal year and a five-year annualized net return of
7.8%.
The additional CPP account ended the fiscal year on March 31, 2024, with net assets of $38.5 billion, compared to $23.8 billion at the end of fiscal 2023. The
$14.7 billion increase in net assets
consisted of $2.0 billion in net
income and $12.7 billion in net
transfers from the CPP. The additional CPP account achieved a 5.7%
net return for the fiscal year and a five-year annualized net
return of 4.9%.
The additional CPP was designed with a different legislative
funding target and contribution rate compared to the base CPP.
Given the differences in their design, the additional CPP has had a
different market risk target and investment profile since its
inception in 2019. As a result of these differences, we expect the
performance of the additional CPP to generally differ from that of
the base CPP.
Furthermore, due to the differences in their net contribution
profiles, the assets in the additional CPP account are also
expected to grow at a much faster rate than those in the base CPP
account.
CPP Investments
Net Nominal Returns1
(For the year ended
March 31, 2024)
|
Base
CPP
|
Fiscal
2024
|
8.1 %
|
Five-Year
|
7.8 %
|
10-Year
|
9.2 %
|
Additional
CPP
|
Fiscal
2024
|
5.7 %
|
Five-Year
|
4.9 %
|
Since
Inception
|
5.6 %
|
1After CPP Investments
expenses.
|
Long-Term Financial Sustainability
Every three years,
the Office of the Chief Actuary of Canada, an independent federal body that
provides checks and balances on the future costs of the CPP,
evaluates the financial sustainability of the CPP over a long
period. In the most recent triennial review published in
December 2022, the Chief Actuary
reaffirmed that, as at December 31,
2021, both the base and additional CPP continue to be
sustainable over the long term at the legislated contribution
rates.
The Chief Actuary's projections are based on the assumption
that, over the 75 years following 2021, the base CPP account will
earn an average annual rate of return of 3.69% above the rate of
Canadian consumer price inflation. The corresponding assumption is
that the additional CPP account will earn an average annual real
rate of return of 3.27%.
CPP Investments
Net Real Returns1,2
(For the year ended
March 31, 2024)
|
Base
CPP
|
Fiscal
2024
|
5.1 %
|
Five-Year
|
4.3 %
|
10-Year
|
6.5 %
|
Additional
CPP
|
Fiscal
2024
|
2.8 %
|
Five-Year
|
1.4 %
|
Since
Inception
|
2.0 %
|
1
After CPP Investments expenses.
|
2 The
real return is the return after the impact of inflation, defined as
the Canadian Consumer Price Index, is taken into account.
|
Relative Performance
The CPP is designed to serve
today's contributors and beneficiaries while looking ahead to
future decades and across multiple generations. CPP Investments was
created to invest and help grow the CPP Fund, maximizing returns
without undue risk of loss.
CPP Investments expresses our risk targets through simple,
two-asset class Reference Portfolios comprising a mix of Canadian
governments' bonds and global public equities (including
Canada). The Reference Portfolios
reflect the targeted level of market risk that we believe will
maximize returns for each of the base CPP and additional CPP
accounts, while also serving as a point of measurement when
assessing the Fund's performance over the long term. CPP
Investments' performance relative to the Reference Portfolios can
be measured in percentage or dollar terms, after deducting all
expenses.
On a relative basis, the aggregated Reference Portfolios' return
of 19.9% exceeded the Fund's net return of 8.0% by 11.9%. As a
result, in fiscal 2024, net value-added for the Fund was negative
11.9% or negative $64.1 billion. Over
the five-year and 10-year periods, net value-added was negative
2.0% and negative 0.3%, respectively.
CPP Investments has deliberately and prudently constructed a
portfolio that is significantly more diversified than the Reference
Portfolios, by asset type, region and sector, and includes
considerable weightings in private equity and real assets. This is
designed to ensure portfolio resilience against the volatility that
can impact net value-added – as experienced this year – and
generate more consistent returns compared with a portfolio that is
mainly exposed to public equity markets. In fiscal 2024, strong
performance of the U.S. public equity market, led by technology
stocks, was reflected in the performance of the Reference
Portfolios.
For information on which of our decisions we believe are adding
the most value, please refer to page 37 of the CPP Investments
Fiscal 2024 Annual Report.
Asset Class and Geography Composition
CPP Investments, inclusive of both the base CPP and additional
CPP Investment Portfolios, is diversified across asset classes and
geographies.
1 Refer to page 69 of the
Annual Report for a breakdown of the composition of each asset
class.
|
2
Credit consists of public and private credit investments, of which
$59.8 billion forms part of the Active Portfolio and $19.5 billion
forms part of the Balancing Portfolio as at March 31, 2024, both
managed by the Credit Investments department.
|
Performance by Asset Class and Geography
Five-year
Fund returns by asset class and geography are reported in the
tables below. In fiscal 2024, both emerging and developed markets
contributed positively to our annual and five-year returns. A more
detailed breakdown of performance by investment department is
included on page 47 of the Fiscal 2024 Annual Report.
Annualized Net
Returns by Asset Class
|
|
Five years ended
March 31, 2024
|
Public
Equities
|
8.4 %
|
Private
Equities
|
13.9 %
|
Government
Bonds
|
(0.3) %
|
Credit
|
3.8 %
|
Real
Estate
|
0.7 %
|
Infrastructure
|
5.9 %
|
Total
Fund1
|
7.7 %
|
Annualized Net
Returns by Geography
|
|
Five years ended
March 31, 2024
|
Canada
|
4.2 %
|
United
States
|
8.9 %
|
Europe
|
4.0 %
|
Asia
Pacific
|
4.6 %
|
Latin
America
|
7.7 %
|
Total
Fund1
|
7.7 %
|
1 The
performance of certain investment activities is only reported in
the total Fund return and not attributed to an asset class and/or
geography return. Activities reported only within total Fund net
returns include those from currency management activities, cash
equivalents and money market securities investments, and absolute
return strategies. For the geography-based presentation, total Fund
net returns also include securities, such as swaps, forwards,
options and pooled funds, that are without country of exposure
classification.
|
Managing CPP Investments Costs
Discipline in cost management is a main thrust of our public
accountability as we continue to build an internationally
competitive enterprise that seeks to create enduring value for
multiple generations of beneficiaries of the CPP.
To generate $46.4 billion of net
income, CPP Investments directly and indirectly incurred
$1,617 million of operating expenses,
$1,449 million in investment
management fees and $2,067 million in
performance fees paid to external managers, as well as $427 million of transaction-related expenses.
Operating expenses increased by $77
million due to inflationary pressure impacting salaries,
employee benefits, and our technology infrastructure. Our operating
expense ratio was 27.5 basis points (bps), which is below
the five-year average of 28.3 bps and below
the 28.6 bps in fiscal 2023.
Management fees decreased by $10
million, remaining broadly in line with the prior year.
Performance fees increased by $302 million driven by more
realization events in the private equity portfolio compared to the
prior year.
Transaction-related expenses, which increased by
$11 million, vary from year to year according to the number,
size and complexity of our investing activities. Other categories
affecting our total cost profile include taxes and expenses
associated with various forms of leverage.
Page 26 of the Fiscal 2024 Annual Report provides a discussion
of how we manage our costs. For a complete overview of CPP
Investments combined expenses, including year-over-year
comparisons, refer to page 45.
Operational Highlights for the Year
Corporate developments
- Ranked one of the world's top-performing public pension funds
by Global SWF when measuring annualized returns between fiscal
years 2014 and 2023 (Global SWF Data Platform, May 2024).
- Issued a joint statement with Canada's leading pension plan investment
managers that calls on companies to embrace the new International
Sustainability Standards Board disclosure framework. The new
framework will help to improve trust and confidence in company
disclosures about sustainability to inform investment
decisions.
Board appointments
- Welcomed the designation of Dean
Connor as Chairperson of the Board of Directors, effective
October 27, 2023. Mr. Connor
succeeded Dr. Heather Munroe-Blum,
CPP Investments' Chairperson since 2014, whose final term as
Chairperson and Director expired in October. Mr. Connor has served
on the Board since August 2021.
- Welcomed the appointment of Nadir
Mohamed to the Board of Directors and the reappointments of
Ashleigh Everett, John Montalbano, Mary
Phibbs and Boon Sim as Directors of the Board for three-year
terms effective October 2023.
Executive announcements
- Separated the roles of Chief Investment Officer (CIO) and Head
of Total Fund Management to allow for more dynamic management of
our portfolio, as well as balance sheet management and tactical
positioning. CIO Edwin Cass now
oversees all investment departments and Manroop Jhooty was
appointed Senior Managing Director & Head of Total Fund
Management, where he leads the balancing and financing portfolio,
which is invested in global public securities, as well as balance
sheet management, tactical positioning, trading and portfolio
design.
Transaction Highlights for the Year
Active Equities
- Completed an investment in Inspira, one of Brazil's leading private K-12 education
providers, serving over 57,000 students across more than 100
schools, in a R$1 billion
(C$270 million) investment round led
by Advent International.
- Invested C$534 million in KPN,
bringing our ownership stake to 2.9%. KPN is a leading
telecommunications company in the
Netherlands.
- Invested C$400 million in SK
Hynix, a South Korean supplier of dynamic and flash memory chips,
increasing our ownership stake to 0.4%.
- Invested an additional C$258
million in LY Corp., a Japanese holding company that owns
and manages a portfolio of businesses including Yahoo! Japan, increasing our ownership stake to
3%.
- Invested C$435 million for
a stake of approximately 1% in Evolution AB, a Sweden-based company that develops, produces,
markets and licenses online casino solutions to gaming
operators.
Credit Investments
- Committed US$325 million to TPG
AG Essential Housing Fund III, which provides financing to U.S.
single-family homebuilders for production-ready, fully entitled
land.
- Formed a US$750 million strategic
capital partnership with Redwood Trust, Inc., a publicly listed
U.S. mortgage real estate investment trust. The partnership
consists of a newly formed US$500
million Asset Joint Venture and a US$250 million corporate secured financing
facility to Redwood Trust.
- Committed US$300 million to an
India-based asset manager that
focuses on structured and private credit opportunities in the
country.
- Committed to provide up to US$138
million in financing to VoltaGrid LLC through a term loan.
Based in the U.S., VoltaGrid is an energy management and generation
company, which provides power, alternate fuels and emissions
reduction solutions.
- Committed US$500 million to
Quantum Capital Solutions Fund II, which will invest primarily in
asset-level joint ventures and hybrid credit investments within the
conventional energy sector in the U.S.
- Invested US$100 million in
financing to support EQT's acquisition of Zeus, a leading contract
manufacturer in the medical devices industry based in the U.S.
- Invested £93 million in a debt facility to Vårgrønn, owner of a
20% stake in Dogger Bank Wind Farm, which is an offshore wind farm
currently under construction, located off the coast of the
U.K.
- Entered into a newly formed venture with Blackstone Real Estate
Debt Strategies, Blackstone Real Estate Income Trust, Inc., and
funds affiliated with Rialto Capital and acquired a 20% equity
stake for US$1.2 billion in a venture
that holds a US$16.8 billion senior
commercial mortgage loan portfolio, primarily located in the
New York metropolitan area.
- Invested A$300 million
(C$268 million) in a first-lien term
loan to TEG, a leading integrated live entertainment and ticketing
service provider in Australia.
- Committed to invest C$197 million
in financing to support CapVest Partners in its acquisition of
Recochem. Headquartered in Canada,
Recochem is a global manufacturer and distributor of aftermarket
transportation and household fluids.
Private Equity
- Committed US$50 million to Sands
Capital Life Sciences Pulse III. Based in the Washington D.C. area, Sands Capital Life
Sciences Pulse III invests in growth-stage life sciences tools,
diagnostics, and therapeutics companies primarily in the U.S.
- Invested US$30 million in Sogo
Medical Group, a leading dispensing pharmacy chain and hospital
services provider in Japan,
alongside CVC Capital.
- Invested C$84 million for a
minority stake in Plusgrade, alongside General Atlantic.
Headquartered in Montreal, Canada,
Plusgrade is a leading provider of ancillary revenue optimization
solutions for the travel industry.
- Committed €100 million to Montagu VII SCSp, which focuses on
Northern European mid-market buyouts in healthcare, critical data,
financial services, digital infrastructure and education.
- Invested US$50 million in Zeus,
alongside EQT. Based in the U.S., Zeus is a leading contract
manufacturer in the medical devices industry.
- Invested US$27 million in
HRBrain, a leading human resources software provider in
Japan, alongside BPEA EQT Middle
Market Growth Fund.
- Closed two commitments with Northleaf Capital Partners, a
Toronto-headquartered global
private markets investment firm: C$200
million to an evergreen separately managed account that
provides access to the Canadian private equity market through
mid-market buyout and growth funds, secondary investments and
direct investments; and C$50 million
to Northleaf Venture Catalyst Fund III, a Canada-focused venture capital fund that
invests in Canadian venture capital and growth funds, secondary
investments and direct investments.
- Committed €500 million to CVC Capital Partners IX, L.P., which
focuses on control and shared-control buyouts across industries
primarily in Europe and the
Americas.
- Invested NZ$105 million (C$88
million) to acquire a 9.4% stake in Pushpay Holdings Ltd., a
New Zealand-headquartered payments
software provider for churches, alongside BGH Capital.
- Agreed to the partial realization of our investment in Visma, a
leading provider of mission-critical cloud software in Europe, retaining an approximate 2% stake in
the company. Net proceeds from the sale are expected to be
approximately C$700 million. Our
original investment was made in 2019.
- Completed the sale of Inmarsat, a European satellite service
provider, to Viasat Inc., a U.S.-based global communications
company, in which we now own an approximate 9% stake. Net cash
proceeds from the sale were US$206
million.
Real Assets
- Established a new real estate investment and operating platform
focused on purpose-built student accommodation (PBSA) in
continental Europe through the
acquisition of our joint venture partner's minority stake in Round
Hill European Student Accommodation Partnership and the full
acquisition of Nido Living, a
leading European PBSA operator and manager. Through these combined
transactions, we are investing up to C$40
million in the platform.
- Invested INR 18.2 billion (C$297
million) in the units of National Highways Infra Trust
(NHIT), an infrastructure investment trust sponsored by the
National Highways Authority of India. We have invested INR 36.8 billion
(C$614 million) in NHIT since 2021
and hold 25% of the units.
- Funded £380 million in total follow-on investments to Octopus
Energy through the fiscal year to support the company's continued
global growth. Octopus Energy is a global clean energy technology
pioneer based in the U.K. Our partnership was established in 2021
and we currently have a 12% ownership stake.
- Committed to acquire a 17.5% interest in Netco for up to €2.0
billion as part of the Optics BidCo investor group. Netco is an
extensive telecommunications network in Italy. The transaction is expected to close in
the summer of 2024.
- Increased our commitment to Boldyn Networks, a leading shared
network infrastructure provider in the U.S. and globally, alongside
partners AIMCo and Manulife, to support the company's ongoing
growth strategy, including the agreed acquisition of Apogee
Telecom. We have committed approximately C$3.5 billion towards Boldyn Networks since 2009
and hold an 86% ownership stake.
- Invested an additional C$540
million in Interise Trust (formerly known as IndInfravit
Trust), our Indian toll roads portfolio company, in which we now
own a 60.8% stake, to help fund the acquisition of four operating
road concessions. In fiscal Q4, we acquired a 50% stake in the
Investment Manager of Interise Trust for C$8
million, alongside our partners, OMERS and ACP, who acquired
25% each.
- Signed a definitive agreement in support of the proposed merger
between Aera Energy, one of California's major energy producers, and
California Resources Corporation, an independent energy and carbon
management company in the U.S. Through this transaction, we will
receive newly issued shares of common stock upon close of the
transaction, expected to represent approximately 11.2% of the
combined company.
- Announced a new partnership with Amsterdam-based Power2X, in which we plan to
invest an initial €130 million to accelerate its growth as a
development platform and fund green molecule projects. Power2X is a
leading European green molecule developer and advisor focused on
the decarbonization of industrial value chains.
- Invested C$1,438 million to
acquire a 24.99% stake in FCC Servicios Medio Ambiente Holding,
SAU, the environmental services division of Spanish conglomerate
Fomento de Construcciones y Contratas, S.A. FCC Servicios Medio
Ambiente is a leading waste management operator in Iberia, the U.K.
and Central Europe, with a growing
presence in the U.S.
- Sold our 45% stake in 1455 Market Street, an office building in
San Francisco, California. Net
proceeds from the sale were approximately US$44 million. Our original investment was made
in 2015.
- Signed an agreement to sell our 45% stake in 10 East 53rd
Street, an office building in Manhattan,
New York. Net proceeds from the sale are expected to be
approximately US$7 million. Our
original investment was made in 2012.
- Sold three office properties in Houston, Texas, including the Phoenix Tower.
Net proceeds from the sales were approximately US$62 million. Our original investments were made
in 2017.
- Agreed to a restructure and sale of a 21% partial interest in
the Kendall Square Development Venture (KDV I) in South Korea. Net proceeds from the sale will
be approximately US$245 million. KDV
I is a joint venture set up in 2015 alongside APG and ESR to
develop modern logistics real estate assets in prime locations
within major strategic logistics hubs in South Korea.
Transaction Highlights Following the Year-End
- Signed an agreement to sell Amitra Capital Limited, which
specializes in managing European non-performing loans and real
estate investments, to Arrow Global Group Limited. Established in
2019, we retain our current direct economic interest in all of the
portfolios managed by Amitra Capital.
- Entered into a definitive agreement to jointly acquire ALLETE,
Inc. alongside Global Infrastructure Partners for US$6.2 billion, including the assumption of debt.
Headquartered in Duluth,
Minnesota, ALLETE is focused on addressing the clean-energy
transition by expanding renewables, reducing carbon, enhancing grid
resiliency, and driving innovation.
- Committed US$450 million to
Ontic, a provider of specialized parts and repair services for
established aerospace technologies, headquartered in the U.K.
- Realized a partial interest of our stake in Viking Holdings for
expected net proceeds of C$714
million through the company's initial public offering.
Viking Holdings is a global cruise operator and travel company. Our
initial investment in the company was made in 2016 and we maintain
a 15% stake.
- Committed US$100 million to
Kedaara Capital Fund IV, which will focus on mid-market buyout and
minority growth investments in India.
- Agreed to sell our ownership stake in Dorna Sports, an international sports
management, media and marketing company, which holds the global
rights to organize the MotoGP and WSBK Championships. Net proceeds
from the transaction are expected to be approximately C$1.9 billion, of which approximately 75% is in
cash and 25% in Series C Liberty Formula One tracking stock. Our
original investment was made in 2013.
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a
professional investment management organization that manages the
Fund in the best interest of the more than 22 million
contributors and beneficiaries of the Canada Pension Plan. In order
to build diversified portfolios of assets, investments are made
around the world in public equities, private equities, real estate,
infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Mumbai, New York
City, San Francisco, São
Paulo and Sydney, CPP Investments
is governed and managed independently of the Canada Pension Plan
and at arm's length from governments. At March 31, 2024, the Fund totalled $632.3 billion. For more information, please
visit www.cppinvestments.com or follow us on LinkedIn, Instagram or
on X @CPPInvestments.
Disclaimer
Certain statements included in this press
release constitute "forward-looking information" within the meaning
of Canadian securities laws and "forward-looking statements" within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and other applicable United States safe harbors. All such
forward-looking statements are made and disclosed in reliance upon
the safe harbor provisions of applicable United States securities laws. Forward-looking
information and statements include all information and statements
regarding CPP Investments' intentions, plans, expectations,
beliefs, objectives, future performance, and strategy, as well as
any other information or statements that relate to future events or
circumstances and which do not directly and exclusively relate to
historical facts. Forward-looking information and statements often
but not always use words such as "trend," "potential,"
"opportunity," "believe," "expect," "anticipate," "current,"
"intention," "estimate," "position," "assume," "outlook,"
"continue," "remain," "maintain," "sustain," "seek," "achieve," and
similar expressions, or future or conditional verbs such as "will,"
"would," "should," "could," "may" and similar expressions. The
forward-looking information and statements are not historical facts
but reflect CPP Investments' current expectations regarding future
results or events. The forward-looking information and statements
are subject to a number of risks and uncertainties that could cause
actual results or events to differ materially from current
expectations, including available investment income, intended
acquisitions, regulatory and other approvals and general investment
conditions. Although CPP Investments believes that the assumptions
inherent in the forward-looking information and statements are
reasonable, such statements are not guarantees of future
performance and, accordingly, readers are cautioned not to place
undue reliance on such statements due to the inherent uncertainty
therein. CPP Investments does not undertake to publicly update such
statements to reflect new information, future events, and changes
in circumstances or for any other reason. The information contained
on CPP Investments' website, LinkedIn, Facebook and Twitter are not
a part of this press release. CPP INVESTMENTS, INVESTISSEMENTS RPC,
Canada Pension Plan Investment Board, L'OFFICE D'INVESTISSEMENT DU
RPC, CPPIB and other names, phrases, logos, icons, graphics,
images, designs or other content used throughout the press release
may be trade names, registered trademarks, unregistered trademarks,
or other intellectual property of Canada Pension Plan Investment
Board, and are used by Canada Pension Plan Investment Board and/or
its affiliates under license. All rights reserved.
______________________________
|
1 Certain figures may not add
up due to rounding
|
SOURCE Canada Pension Plan Investment Board