Home > News > Pensions > Canada Pension Plan Investment Board Posted Lackluster 3.6% Return in Third Quarter

PensionsFebruary 21, 2020

Canada Pension Plan Investment Board Posted Lackluster 3.6% Return in Third Quarter

Pension giant increases its net asset value to $318 billion.

The Canada Pension Plan Investment Board (CPPIB) posted a so-so 3.6% return net of costs during the third quarter of its fiscal 2020 to reach net assets of C$420.4 billion ($318.2 billion), up from C$409.5 billion at the end of the previous quarter.

The performance surpassed the previous quarter’s return of 2.3% net of costs, as well as the year-ago third quarter return of 1.1%.

The fund reported that the C$10.9 billion increase in assets for the quarter consisted of C$14.5 billion in net income after all costs, minus C$3.6 billion in net Canada Pension Plan (CPP) cash outflows. It also said that on an annual basis, contributions to the fund continue to exceed outflows.

“All of our investment departments contributed to a very solid quarter, advancing the fund,” Mark Machin, president and CEO of CPPIB, said in a statement. “Financial results and operational performance across CPP Investments’ global active programs remain strong, although the relative value of the Canadian dollar, against several foreign currencies, affected overall results.”

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The fund’s five-year and 10-year annualized net nominal returns were 10.4% each, while its five-year and 10-year and annualized net real returns were 8.4% and 8.5%, respectively.

The fund grew by C$28.4 billion for the nine-month fiscal year-to-date period, which consisted of C$27.9 billion in net income after all costs, plus C$500 million in net CPP cash inflows. It had a net return of 7.1% after all costs during the period.

The asset allocation for the fund as of the end of 2019 was 30.7% in public equities; 24.9% in private equities; 11.1% in credit investments; 11% in real estate; 10.5% in government bonds, cash, and absolute return strategies; 8.3% in infrastructure; and 3.5% in other real assets.

The Office of the Chief Actuary of Canada conducts an independent review of the sustainability of the fund every three years. In its most recent review, the office said that, as of the end of 2018, the fund continues to be sustainable over the 75-year projection period at the current legislated contribution rates. The Chief Actuary’s projections are based on the assumption that the base account will earn an average annual real rate of return of 3.95% above the rate of Canadian consumer price inflation, after all investment costs and operating expenses through the year 2093. The corresponding assumption is that the additional CPP account will earn an average annual real rate of return of 3.38%.

UK Universities Launch Largest Strike in History over ‘Radical Changes’ to Pension Plan

University staff start 14 days of strikes at more than 70 campuses.

By Steffan Navedo-Perez

The UK’s University and College Union (UCU) on Thursday launched a 14-day strike over concerns that include falling pay, a gender and ethnic pay gap, precarious employment practices, unsafe workloads, as well as a “radical redesign” of its pension fund, the Universities Superannuation Scheme (USS).

The radical redesign, according to the USU, is pertinent to several factors on the state of their benefits. Under the proposed changes, the employers allegedly want to end guaranteed pension benefits, and told beneficiaries that “your final pension should depend on how your ‘investments’ perform and not on your contributions,” according to the USU’s website. Additionally, members under the plan would have to increase their contributions.

February’s strikes mark the second time the UCU is protesting the changes in the recent months. More than 40,000 members of the union led a strike throughout 60 campuses against the propositions. This latest strike encompasses 74 campuses.

“It is incredibly frustrating that UCU members are being forced to walk out again to secure fair pay, conditions, and pensions,” General Secretary Jo Grady said in a statement. “This unprecedented level of action shows just how angry staff are at their universities’ refusal to negotiate properly with us.”

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“Vice-chancellors have had months to come up with serious offers to avoid widespread disruption on UK campuses. Their failings are clear for all to see today and the blame for the disruption caused by the strikes lays squarely at their door,” Grady added.

The UCU also said pay for its members has effectively been cut by 20% since 2009, while staff are mandated to work longer hours “than ever before,” the organization said. It also alleges that the employers’ own analysis shows women and minority ethnic staff experience significant pay discrimination.

Employers have refused to move from their offer of a minimum pay raise of 1.8% for 2019-2020, as many are already in “precarious” financial positions, said the Times Higher Education publication, citing Mark Smith, chair of the University and College Association. Many are running deficits and “although I wouldn’t want to make alarmist predictions” on their futures, significant increases in the cost of staff, which take up half of universities’ overall income, would increase the pressure on them, Smith said.