Canada Pension Plan Investment Board said it lost 2.9 per cent in the volatile March quarter, but beat broader market indexes and the typical Canadian pension fund.
The loss put the plan’s return for the full fiscal year ended March 31 at 6.8 per cent. It reported $539-billion in assets.
“I would describe them as strong returns considering the the turbulent and volatile backdrop, especially in the first quarter of the calendar year,” CPPIB chief executive officer John Graham said Thursday in an interview with The Globe and Mail.
The first three months of 2022 saw equity market volatility caused in part by Russia’s invasion of Ukraine. At the same time, the air came out of the tech and growth-stock balloon, with even established names, building on their late-2021 losses. Skyrocketing inflation and rising interest rates roiled bond markets.
CPPIB said the S&P Global LargeMidCap Index, a measure of stocks that CPPIB uses as 85 per cent of its benchmark reference portfolio, fell 6.5 per cent in the quarter. The FTSE Canada Universe All Government Bond Index, the remaining 15 per cent of the benchmark, fell 7.2 per cent. Blended, that means CPPIB beat a benchmark of negative 6.6 per cent by more than three percentage points.
A broader measure of Canadian pension plan investment performance produced by the bank Northern Trust came in at a 6.4 per cent loss for the first quarter of 2022, CPPIB noted.
The pension manager posted a 10-year return of 10.8 per cent, nearly as high as it was the year before.
Mr. Graham said “inflation is probably the topic that we spend the most time thinking about right now … we were probably surprised that inflation has been as persistent as it is and the disruption of supply chains are so persistent.”
“But if we take a step back, we have built this portfolio to basically perform through cycles – it’s there as a long term portfolio – with a view that inflation in time will go back into the targeted level.”
For the fiscal year, CPPIB’s public equities investments – about a quarter of the portfolio – returned 1.3 per cent. The manager said the stocks it actively picked were down 5.8 per cent, “driven by the performance of its investments in China.” In its annual report, CPPIB cited “the public equity market reaction to new regulatory interventions, a resurgence of COVID-19 in the fourth quarter and investor fears of the potential for sanctions from Western countries if China were to support Russia in Ukraine.”
“As you expect in a diversified portfolio, some things perform really well and some things perform less well on a relative basis,” Mr. Graham said “The Chinese equity markets performed less well. But on a five-year basis, Asia-Pacific is still our second-highest performing geography. So we still believe the principles and the underlying rationale for being global investors there.”
Fixed income – bonds and similar investments that make up just 7 per cent of the portfolio – fell 3.8 per cent for the year. CPPIB’s credit department, which does lending or offers debt-like instruments directly to companies – returned 0.7 per cent. Credit is now 16 per cent of the CPPIB portfolio.
CPPIB’s private-equity department – its largest at nearly one-third of the portfolio – returned 18.6 per cent.
Real estate returned 10.2 per cent, while infrastructure returned 10.8 per cent. Each department represents about 9 per cent of CPPIB’s portfolio.
The Canada Pension Plan, founded in 1966, is the primary national retirement program for working Canadians. The government created CPPIB in 1999 to professionally manage the plan’s money. Over time, CPPIB has embraced active management and its blend of stocks, bonds, real estate, infrastructure, private equity and other specialized investments has outperformed public markets and its reference portfolio.
CPPIB said its calendar year 2021 return was 13.8 per cent, comparing favorably to the five large Canadian pension plans that close their books at Dec. 31.
Each of the “Maple Eight” big Canadian public pension plans serve a different demographic of benefit recipients, with a different mix of liabilities. So, their portfolios – and the returns they should expect – differ.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
