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Foreign exchange losses due to a stronger Canadian dollar contributed to a net loss of $5 billion for the Canada Pension Plan Investment Board in the quarter ended June 30, translating to a negative return of 0.8 per cent.
The first quarter loss was offset by $9 billion in transfers from the Canada Pension Plan. As a result, the CPP Fund ended the quarter with $575 billion, up from $570 billion at the end of fiscal 2023.
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“The quarter’s results reflect gains across most asset classes, which were offset by the impact of foreign exchange losses due to a stronger Canadian dollar relative to the U.S. dollar,” said John Graham, chief executive of CPPIB. “While we anticipate periods of uncertainty to persist, we expect our portfolio will continue to be resilient and create value for CPP contributors and beneficiaries for generations to come.”
Investments in public equities and renewable energy contributed to the first quarter’s results in local dollar terms, as did gains by external portfolio managers, while investments in credit and real assets were relatively flat, the pension management organization said. Fixed income assets declined in value due to higher interest rates set by central banks.
CPPIB, which invests funds that aren’t needed to pay current benefits of the Canada Pension Plan, reports financial results in Canadian dollars. The CPP Fund, which includes base CPP and additional CPP accounts introduced in 2019, has a 10-year annualized net return of 9.8 per cent, representing cumulative net income of $314 billion.
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In the most recent triennial review published in December 2022, the chief actuary reaffirmed that, as at Dec. 31, 2021, both the base and additional CPP continued to be sustainable over the long term at legislated contribution rates. The projections are based on the assumption that, over 75 years, the base CPP account will earn an average annual rate of return of 3.69 per cent above the rate of Canadian consumer price inflation, while the additional CPP account will earn an average annual real rate of return of 3.27 per cent.
As of June 30, 2023, base CPP had a five-year net real return (after expenses and the impact of inflation) of four per cent and a 10-year net real return of 7.1 per cent. The net real return of the additional CPP accounts is 1.3 per cent since inception in 2019.
During the latest quarter, CPPIB did a number of transactions in asset classes including private equity, such as completing the sale of Inmarsat, a European satellite service provider, to Viasat Inc., a U.S.-based global communications company. The Canadian pension now owns a nine per cent stake in Viasat and received net cash proceeds from the sale of US$206 million.
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In the real assets segment, CPPIB agreed to acquire a 24.99 per cent stake in FCC Servicios Medio Ambiente Holding, SAU, the environmental services division of Spanish conglomerate Fomento de Construcciones y Contratas, S.A., for $1.4 billion. The U.K. and European waste management company has a growing presence in the U.S.
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