A record return over the first full year of the pandemic has put the manager of Canada’s largest retirement fund years ahead of schedule to meet a long-term goal of having half a trillion dollars in assets by 2028.
The Canada Pension Plan Investment Board reported that its funds earned 20.4 per cent net of all costs for its 2021 fiscal year ended March 31, the highest annual return since its inception in 1999. As of March 31, the CPPIB had $497.2 billion in assets under management, up from $407.3 billion in fiscal 2020 when it had a below average return of 3.1 per cent due to the onset of the coronavirus pandemic.
John Graham, chief executive officer of the CPPIB — who previously served as global head of credit investments — said conditions changed rapidly and in the fund’s favour over the past year. “We’re seven years ahead of schedule for reaching half a trillion dollars.”
The CPPIB has a 75-year investment horizon — much longer than most private sector funds — and it’s designed to ensure the Canada Pension Plan will be able to meet its obligations to retirees for decades to come. All six of the CPPIB’s departments showed positive performance over fiscal 2021, although some gains were offset by foreign exchange losses due to the Canadian dollar’s strength compared with the U.S. dollar.
One of the organization’s recent strategic moves was to combine the two teams that invested separately in conventional and new energy. Graham said the new sustainable energy group will be headed by Bruce Hogg, who founded the CPPIB’s power and renewables group a few years ago.
The new group’s mandate is to invest in all types of energy assets, including carbon-based fuels such as oil, natural gas and coal, but with the view that “climate change is a real risk that needs to be managed,” said Graham. “The best way for us to do it is to [be an] active, engaged owner and invest through this energy transition.”
One Canadian example of that investment strategy is a European joint venture with Calgary-based Enbridge Inc., which is primarily a North American operator of conventional oil and natural gas pipelines. He said the CPPIB has also invested in Wolf Midstream, a partner in the Alberta Carbon Trunk Line, which will capture and store carbon that would otherwise go into the atmosphere with conventional energy sources.
Graham, who had a science background before joining the CPPIB in 2008, became CEO in February after former CEO Mark Machin disclosed in February that he travelled to the United Arab Emirates to receive a coronavirus vaccination.