CPP Investments’ chief executive officer has described the organization as a supertanker, referring to scale — a portfolio approaching $800 billion — and the inability to pivot quickly due to its investments across illiquid assets.
“We need to be cognizant of that,” said Derek Walker, the organization’s managing director and head of applied research and models in total fund management, during a fireside chat at the Canadian Investment Review’s 2025 Investment Innovation Conference. “We’re not well-suited to a strategy that would require us to quickly shift things around.”
CPP Investments’ steady focus on a long horizon carries over to the way it watches trends, such as artificial intelligence. “If the world is going to look radically different, we need to prepare for that. For us, it’s about trying to identify those big structural shifts and being positioned for them rather than catching the next wave.”
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Speaking further about AI, Walker said the investment organization is considering how to position the technology for success while also being aware it could be a giant bubble. “Rather than leaning strongly on one of those camps, we look at our portfolio and say, ‘How do we isolate the risks of AI?’ . . . We can call it an AI factor and then manage that risk and understand how different parts of our portfolio are exposed to that risk and then decide how much of that risk we want to take.”
On the opportunity side of AI, he highlighted data centres, noting CPP Investments owns one in Cambridge, Ont. “It’s an example of both a Canadian angle, but also how we’re trying to manage that risk and opportunity related to innovation.”
Returning to risk, Walker discussed how the organization aims to reduce its portfolio to equity risk so it can diversify across different sources of risk. Traditionally, investors tackled this challenge with a 60/40 portfolio, but with lingering inflation and the fiscal situation in the U.S., he noted there’s a potential structural issue with the world’s largest fixed income market.
That’s where alternatives come in. “Alternatives can provide us with an uncorrelated stream of returns that can help balance out the equity risk, but don’t have the same exposures as that classic fixed income. As a result, we can use those alternatives to help balance the risks across the portfolio.”
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While CPP Investments’ large pool of capital is also competitive on a global scale, Canada is its home market, he said, with about 12 per cent ($117 billion) of the portfolio invested in the country. Walker also highlighted Canada’s reputation as a world-class pension industry and noted it has the ingredients for innovation, including a talented workforce and natural resources.
The portfolio’s domestic investments are across many different sectors, he said, including public equities, fixed income and government bonds, as well as energy, natural resources and infrastructure. “Canada, regardless of whether you look at it from a market capitalization standpoint or a GDP standpoint, is the classic small open economy. We’re about three per cent of the global economy. For us to really achieve the benefits of our diversification, we also have to look internationally.”
When asked to highlight the top tools other institutional investors could use in their investment approaches, Walker discussed diversifying across different sources of risk, the importance of liquidity management and currency management. “How much should we do? Where should we hedge? Where should we not hedge? And for us, as an equity-heavy investor, not hedging has been a net benefit for us. We partially hedge our foreign currency exposure. But not fully hedging has been quite a benefit to returns in risk management.”
Read more coverage of the 2025 Investment Innovation Conference.