Home > News > Asset Allocation > CPP Investments Returns 8% in Fiscal 2024
Asset Allocation

CPP Investments Returns 8% in Fiscal 2024

Net assets rose to $462.66 billion in the period ending March 31. 
By Matt Toledo



The Canada Pension Plan Investment Board announced on Wednesday that had achieved an 8% return in its fiscal year 2024, a period that ended March 31.

Net assets of the fund increased to CAD 632.3 billion ($462.66 billion) an increase from CAD 570 billion the previous fiscal year. 

Strong performance in public equities, infrastructure, energy and credit boosted the fund’s returns, while weak performance in emerging markets and real estate negatively impacted returns.

“The CPP Fund’s growth this year continued the trend of reaching heights several years ahead of initial actuarial projections,” said John Graham, president and CEO in a statement. “Solid performance by all of the investment departments and key corporate functions helps demonstrate how our strategy is on track.”

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news.

CPPIB, which manages the assets of the Canada Pension Plan, has 22 million contributors and beneficiaries, more than half of the population of Canada. The fund has returned 7.7% and 9.2% over the past five and 10 years annualized. 

Returns by Asset Class and Geography

The CPP Investments portfolio has a 28% allocation to public equities and a 31% allocation to private equity. Government bonds make up 12%, credit, real estate and infrastructure compose 13%, 8% and 8% of the portfolio respectively.

Public equities returned 13.8% in fiscal 2024, and private equity returned 10.4%. Credit and infrastructure returned 10.8% and 2.6% respectively. The only asset classes with negative returns were government bonds, which returned negative 0.4%, and real estate, which returned negative 5%. 

In fiscal 2024, the fund cut its holdings in infrastructure and real estate by one percentage point each and increased its allocation to public equities by four percentage points, also reducing private equity by two percentage points, compared with fiscal year 2023.

From fiscal 2023 to 2024, the fund increased its investments in the United States to 42% of the portfolio from 36%. CPPIB also decreased its allocation to investments in Canada to 12% from 14% of the portfolio. Exposure to Europe increased 1% and exposure to Asia Pacific decreased to 21% from 26%.

Investments across all geographies had positive returns in fiscal 2024. U.S. investments returned 9.4%. CPP Investments noted in its fiscal 24 annual report that its U.S. investments were responsible for 59% of the fund’s 7.7% 5-year annualized returns. 

Investments in the Asia Pacific region returned 0.1%, something that CPPIB attributed to currency losses and underperformance from Chinese investments. The fund also returned 5.9% in fiscal 2024 from its Canadian investments, which are primarily in government bonds and infrastructure investments.

The Latin America region returned 11.5%, primarily driven by Brazilian equities. CPPIB’s European investments returned 5.8%, with positive returns in public and private equity but weaker returns from the utilities sector and infrastructure, an impact from the war in Ukraine. 

Related Stories:

CPPIB and Global Infrastructure Partners to Acquire Energy Provider Allete

Octopus Energy Receives New Investments from CPPIB, GIM

CPP Investments Consolidates Wind Energy Investments

Tags: , , , ,

Home > News > Asset Allocation > Where Does a Bitcoin ETF Fit in an Allocator’s Portfolio?
Asset Allocation

Where Does a Bitcoin ETF Fit in an Allocator’s Portfolio?

Pension funds are beginning to explore exposure to cryptocurrencies, which could act as diversifying assets.  
By Matt Toledo



Earlier this month, the State of Wisconsin Investment Board, which manages became the first pension fund disclosed an allocation to bitcoin ETFs in its portfolio, $160 million split across an ETF from BlackRock and another from Grayscale. This allocation made headlines as SWIB became the first public pension to announce an allocation to a bitcoin ETF.  

The SEC approved the first set of bitcoin ETFs in January, with offerings from Grayscale, BlackRock, ProShares, and Fidelity made available to investors for the first time. These spot ETFs track the price of the digital currency by holding it as its underlying asset, according to Fidelity. While the ETFs provide accessibility and exposure to bitcoin, they do not give an investor direct ownership of the digital asset.  

In the first quarter of 2024, 563 institutional investors reported buying $3.5 billion worth of bitcoin ETFs, according to an analysis of 1Q 2024 13F SEC filings by Bitwise Asset Management CIO Matt Houghan. BlackRock’s IBIT ETF alone saw inflows from 414 institutional investors in the first quarter according to a 13F filing. 

Although the number of allocators acquiring these ETFs is very small, spokespersons for two bitcoin ETF providers tell CIO that some pension funds are only starting to speak with their boards and investment committees about acquiring these ETFs and are in a learning phase on these kinds of investment products.  

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news.

Bitcoin ETFs can provide a level of liquidity that has not meaningfully existed with traditional cryptocurrency investments, as the ETFs also do not have the massive transaction costs that have traditionally been associated with owning cryptocurrency. The ETFs can also provide more security to investors, as exposure to crypto was made possible with these ETFs without having to use a traditional crypto custodian.  

“Spot bitcoin ETFs have been a real game changer in terms of creating a structure where institutional allocators can have more confidence that they get exposure to the underlying asset class and don’t have the catastrophic risk of loss that has existed with other structures,” says Bob Elliott, co-founder and CEO of index provider Unlimited. 

These ETFs have made exposure to crypto more attainable, but where do they fit into an allocator’s portfolio? 

Attractive as a Diversifier and a Risk Asset  

Institutional investors that are looking to add volatility to their portfolio and might have an opportunistic high-risk tranche within the portfolio could see crypto as a natural candidate for consideration in that sleeve, says Kevin Gallagher, principal at management consulting firm Casey Quirk, a Deloitte Company.  

This type of allocation would still be a minority of a fund’s overall portfolio. While SWIB owns $164 million in these ETFs, its allocation represents a fraction of a percentage point of its $156 billion portfolio. 

Over the past couple of years, bitcoin has transitioned from a period where it provided a higher beta version of tech equity risk to one where it has become “increasingly idiosyncratic,” Elliott says.  

Questions remain for institutional investors: “Is it true idiosyncratic risk, or does it have certain hedging? Is it a higher beta version of tech-directed risk? Or is it a hedge particularly for certain risks, whether it’s geopolitical or inflation risks?” Elliott says.  

We are still in the early days of understanding bitcoin, according to Elliott. The core question institutions have addresses bitcoin’s risk/return profile: Is it an asset that can reliably deliver a positive expected return or not?  

Bitcoin ETFs are likely to be treated as a smaller diversifying asset that’s designed to create the opportunity for outsized returns or to introduce volatility to a portfolio in a way that is attractive, according to Gallagher.   

Will More Funds Add Crypto ETFs?  

Likely not, Gallagher says, “I don’t think we’ll see very many institutions make substantial allocations to this asset class, but we will see it used opportunistically, [ETFs] simplify the mechanism for how these groups can invest in the asset.” Most allocators do not have existing relationships with crypto custodians like Coinbase and Binance, but they likely have existing custodial relationships with some of the bitcoin ETF providers.   

“The advantage of using the ETF is that every institutional investor already has the custodial relationships that allow them to hold the ETFs just like they’re able to hold stocks effortlessly and using the counterparties that they already know,” Gallagher continued.  

Because we do not fully understand the return profile of bitcoin, this could prevent some allocators from investing in these ETFs. “The thing getting in the way of more significant allocations is that we still don’t have a clear picture of the underlying macroeconomic drivers of bitcoin and other cryptocurrencies as it relates to the rest of the assets in the portfolio,” Elliott says.  

As barriers to entry come down, Gallagher expects some institutions to dip their toes in the water, with smaller allocations, small portions of their portfolio.  

In March, the Government Pension Investment Fund of Japan issued a request for information on illiquid assets such as cryptocurrencies.  

Related Stories: 

Wisconsin Pension Buys $160 Million in Bitcoin ETFs 

DC Circuit Court Orders SEC to Reconsider Bitcoin ETF 

Regulators Unhappy With Bitcoin in Retirement Plans 

Tags: , , , , , , , , ,

«