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CPP Investments Net Assets Total $456.7 Billion at Second Quarter Fiscal 2021 – Canada NewsWire

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All figures in Canadian dollars unless otherwise noted.

Second-Quarter Highlights:

  • $21.6 billion in net income generated for the Fund
  • 10-year net return of 10.5%

TORONTO, Nov. 16, 2020 /CNW/ – Canada Pension Plan Investment Board (CPP Investments) ended its second quarter of fiscal 2021 on September 30, 2020, with net assets of $456.7 billion, compared to $434.4 billion at the end of the previous quarter.

The $22.3 billion increase in net assets for the quarter consisted of $21.6 billion in net income after all CPP Investments costs and $0.7 billion in net Canada Pension Plan (CPP) contributions.

The Fund, which includes the combination of the base CPP and additional CPP accounts, achieved
10-year and five-year annualized net nominal returns of 10.5% and 9.6%, respectively. For the quarter, the Fund returned 5.0% net of all CPP Investments costs. 

For the six-month fiscal year-to-date period, the Fund increased by $47.1 billion consisting of
$44.5 billion in net income after all CPP Investments costs, plus $2.6 billion in net CPP contributions. For the period, the Fund returned 10.8% net of all CPP Investments costs.

“CPP Investments’ diversified Fund performed well this quarter, generating strong returns. However, we continue to be cautious about the months ahead given the highly uncertain economic fallout of COVID-19 and its effect on markets,” said Mark Machin, President & Chief Executive Officer, CPP Investments. “All of our investment departments generated positive returns this quarter. Our investment professionals continue to pursue opportunities that will bring value to the Fund over the long term.”

The Fund’s growth is primarily attributed to the continued recovery of global public equity markets in the first two months of the quarter, reflected in gains in both the Fund’s public and private holdings. Stock markets retracted in September driven by concerns over new COVID-19 lockdown measures and uncertainty related to monetary stimulus, tempering these gains.

CPP Investments continues to build a portfolio designed to achieve a maximum rate of return without undue risk of loss, taking into account the factors that may affect the funding of the CPP and the CPP’s ability to meet its financial obligations. The CPP is designed to serve today’s contributors and beneficiaries while looking ahead to future decades and across multiple generations. Accordingly, long-term results are a more appropriate measure of CPP Investments’ performance compared to quarterly or annual cycles.

Fund 10- and Five-Year Returns1, 2, 3
(for the period ending September 30, 2020)


Investment Rate of Return
(Nominal)

Net Income4

10-Year Annualized

10.5%

$273.0 billion

Five-Year Annualized

9.6%

$163.9 billion

Fiscal 2021 YTD

10.8%

$44.5 billion

1

After all CPP Investments costs.

2

Rates of return are calculated on a time-weighted basis.

3

Includes both base and additional CPP.

4

Dollar figures are cumulative.

Performance of the Base and Additional CPP Accounts
The base CPP account ended its second quarter of fiscal 2021 on September 30, 2020, with net assets of $452.6 billion, compared to $431.1 billion at the end of the previous quarter. The $21.5 billion increase in assets consisted of $21.5 billion in net income after all costs, less $54 million in net base CPP outflows. The base CPP account achieved a 5.0% net return for the quarter.

The additional CPP account ended its second quarter of fiscal 2021 on September 30, 2020, with net assets of $4.1 billion, compared to $3.3 billion at the end of the previous quarter. The $0.8 billion increase in assets consisted of $0.1 billion in net income and $0.7 billion in net additional CPP contributions. The additional CPP account achieved a 3.0% net return for the quarter.

The base and additional CPP differ in contributions, investment incomes and risk targets. We expect the investment performance of each account to be different.

Long-Term Sustainability
Every three years, the Office of the Chief Actuary of Canada conducts an independent review of the sustainability of the CPP over the next 75 years. In the most recent triennial review published in December 2019, the Chief Actuary reaffirmed that, as at December 31, 2018, both the base and additional CPP continue to be sustainable over the 75-year projection period at the legislated contribution rates.

The Chief Actuary’s projections are based on the assumption that, over the 75 years following 2018, the base CPP investments will earn an average annual rate of return of 3.95% above the rate of Canadian consumer price inflation, after all costs. The corresponding assumption is that the additional CPP investments will earn an average annual real rate of return of 3.38%.

The Fund, combining both the base CPP and additional CPP accounts, achieved 10-year and five-year annualized net real returns of 8.8% and 8.0%, respectively.

Diversified Asset Mix

For the quarter ending September 30, 2020

($ billions)                                                 





$

%


 

Public Equities




Canadian

6.7

1.5


Foreign

84.0

18.4


Emerging

52.9

11.6



143.6

31.5


 

Private Equities




Canadian

1.1

0.3


Foreign

95.0

20.8


Emerging

16.1

3.5



112.2

24.6


 

Government Bonds




Non-marketable

22.9

5.0


Marketable

74.5

16.3



97.4

21.3


 

Credit

55.2

12.1


 

Real Assets




Real estate

43.6

9.5


Infrastructure

37.4

8.2


Energy and resources

8.2

1.8


Power and renewables

9.1

2.0



98.3

21.5


External Debt Issuance

(38.6)

(8.5)


Cash and Absolute Return Strategies1

(11.5)

(2.5)


Net Investments

456.6

100.0


Non-investment assets2

0.1


Net Assets3

456.7


1

The negative balance of $11.5 billion in Cash & Absolute Return Strategies represents the net amount of financing through
derivatives and repurchase agreements, and the current net position from Absolute Return Strategies.

2

Includes assets such as premises and equipment and non-investment liabilities.

3

Includes $452.6 billion of base CPP and $4.1 billion of additional CPP.

Operational Highlights:

Corporate developments

  • Hosted 10 public meetings, one for each of the nine provinces that participate in the CPP and one meeting for the three territories, to inform Canadians about the Fund’s financial performance and our investment strategy.
  • Published the 2020 annual Report on Sustainable Investing, which outlines CPP Investments’ approach to environmental, social and governance factors. The report shows that our investments in global renewable energy companies more than doubled to $6.6 billion in the one-year period of the report.
  • Thinking Ahead, the thought leadership lab at CPP Investments, issued research on How COVID-19 is shaping the landscape for long-term investors. In this latest report, professionals at CPP Investments analyzed the breadth of change expected following the global pandemic, as well as emerging opportunities.

Executive announcements

  • Appointed Ed Cass as CPP Investments’ first dedicated Chief Investment Officer (CIO) and Head of Total Fund Management. The CIO role was created to effectively address the anticipated size and scale of CPP Investments by 2025 and beyond. Total Fund Management comprises the former Total Portfolio Management department and the Balancing & Collateral team formerly residing in the Capital Markets and Factor Investing department. Ed was most recently Global Head of Real Assets.
  • Appointed Deborah Orida as Senior Managing Director & Global Head of Real Assets, where she will be responsible for the global Real Assets program, which encompasses Energy & Resources, Infrastructure, Power & Renewables, Real Estate and Portfolio Value Creation. Deborah was most recently Senior Managing Director & Global Head of Active Equities.

Board announcements

  • Dr. Heather Munroe-Blum was reappointed as Chairperson of the Board for a term of three years ending in October 2023. Dr. Munroe-Blum first became a Director of CPP Investments in 2010 and assumed the role of Chairperson in 2014. She also serves on the board of the Royal Bank of Canada and is Chairperson of the Gairdner Foundation. Dr. Munroe-Blum served as the Principal and Vice-Chancellor (President) of McGill University from 2003-2013.
  • Mary Phibbs was reappointed to the Board of Directors for a term ending in May 2023.
    Ms. Phibbs was first appointed a CPP Investments Director in May 2017. She also serves as Chairperson of Virgin Money Unit Trust Managers Limited and is a non-executive Director of Morgan Stanley International Limited, Morgan Stanley & Co International plc and Morgan Stanley Bank International Limited. Ms. Phibbs previously had a 40-year, multidisciplinary career in international banking and finance, both in executive and non-executive roles.
  • The National Association of Corporate Directors (NACD) named the CPP Investments Board of Directors as a winner of this year’s NACD NXT® awards. NACD NXT showcases boards that are leveraging innovation and diversity to elevate company performance, and this is the first time the recognition has been awarded to a Canada-based organization.
  • Board Chairperson Heather Munroe-Blum was appointed to The Committee on the Future of Corporate Governance in Canada, a joint initiative established by TMX Group and the Institute of Corporate Directors to provide updated guidance on corporate governance for Toronto Stock Exchange-listed companies.

Bond issuance

  • Completed two international debt offerings: GBP one-year term notes totalling £200 million and USD five-year term notes totalling US$1 billion. CPP Investments uses a conservative amount of short- and medium-term debt as one of several tools to manage our investment operations. Debt issuance gives CPP Investments flexibility to fund investments that may not match our contribution cycle. Net proceeds from the issuances will be used by CPP Investments for general corporate purposes.

Second-Quarter Investment Highlights:

Active Equities

  • Invested an additional C$309 million in a rights offering by Cellnex Telecom S.A., a leading mobile-tower owner and operator based in Spain, holding total ownership in the company at 4.95%.
  • Invested US$50 million in Perfect Day, Inc., an animal-free dairy maker, the first investment in our Climate Change Opportunities strategy.

Credit Investments

  • Invested US$75 million in a senior secured term loan issued by Global Lending Services LLC, an auto financing solutions provider.
  • Invested US$175 million in the first lien term loan, senior secured notes and second lien term loans of LogMeIn, Inc., a provider of remote working, collaboration and customer engagement software-as-a-service solutions.
  • Committed to acquire up to US$1 billion of home improvement focused consumer loans from Service Finance Company, LLC, a sales finance business owned by ECN Capital Corp. Under the agreement, the purchases will be made through 2020 and 2021.

Private Equity

  • Committed US$300 million in equity to the proposed acquisition of Virtusa Corporation (Virtusa) for an approximate 24% stake, alongside Baring Private Equity Asia. Virtusa is a global provider of a full spectrum of IT services.
  • Increased our investment in Visma, the software-as-a-service provider headquartered in Norway, to an approximate 6% stake.
  • Completed the acquisition of Galileo Global Education, a leading international provider of higher education and Europe’s largest higher education group, as part of a consortium of investors, with an investment of €550 million for a significant minority stake.

Real Assets

  • Extended our partnership with GLP through the launch of the GLP Japan Income Fund (GLP JIF), the largest private open-ended logistics fund in Japan. The partnership with GLP was first established in 2011, and at the end of August 2020, CPP Investments successfully exited the investment in GLP JDV I, receiving approximately JPY 48 billion (C$590 million) of net proceeds. Following the disposition, CPP Investments recommitted JPY 25 billion (C$307 million) of the proceeds into the newly established GLP JIF.
  • Expanded the existing multifamily joint venture alongside Cyrela Brazil Realty to include new partner, Greystar Real Estate Partners, LLC, the global leader in rental housing. Together, the joint venture partners will develop a portfolio of world-class rental housing assets across São Paulo and continue to target an investment of up to R$1 billion in combined equity. We will maintain majority interest in the joint venture.

Asset Dispositions:

  • Sold our ownership interest in Zoox, a U.S. technology company focused on developing a fully integrated autonomous vehicle mobility solution, as part of Amazon.com, Inc.’s acquisition of the company. Our ownership interest was initially acquired in 2018.
  • Sold our 45% stakes in AMLI 900, AMLI Lofts, AMLI Campion Trail, and AMLI Arts Center, multifamily properties in the U.S. Combined net proceeds from the sales were approximately US$224 million. Our ownership interests were initially acquired in 2012 and 2013.
  • Exited the investment in luxury retailer Neiman Marcus Group LTD LLC through Chapter 11 proceedings in U.S. Bankruptcy Court and, as a result, did not realize any net proceeds from the investment. Along with our co-sponsor, we continue to be majority investors in Mytheresa, a high-growth, online ultra-luxury fashion retailer. Our ownership interest was initially acquired in 2013.
  • Sold 10,000,000 shares in the capital of Battle North Gold Corporation, a Canadian gold mine developer, through the open markets for net proceeds of approximately C$19 million.

Transaction Highlights Following the Quarter:

  • Entered into an agreement to invest an additional C$50 million, through a private placement of common shares, in Premium Brands Holdings Corporation, a specialty food manufacturing and differentiated food distribution businesses, to support its joint acquisition of Clearwater Seafoods Incorporated with a Mi’kmaq First Nations coalition.
  • Invested an additional US$350 million in Viking Holdings Ltd, the parent company of Viking Cruises, alongside our co-investor TPG Capital. Viking Cruises is a leading provider of worldwide river and ocean cruises and this investment will support its continued development. The transaction is subject to customary closing conditions, including regulatory approvals.
  • Invested in a combination of secondary offerings and market purchases of Avantor Inc., a leading global provider of products and services to customers in the biopharma, healthcare, education and government, and advanced technologies and applied materials industries, holding total ownership in the company at 2.0% with a combined investment of US$285 million.
  • Allocated an additional £300 million of equity to investment vehicles in the United Kingdom targeting the logistics sector, alongside Goodman Group and APG Asset Management N.V. The expansion follows the success of the Goodman UK Partnership established in 2015.
  • Exited our 18% ownership stake in Advanced Disposal Services Inc., a solid waste services company in the U.S., through its acquisition by Waste Management Inc. Net proceeds from the sale were US$502 million. Our ownership stake was originally acquired in 2016.
  • Converted and sold our convertible debt position in Bloom Energy, a manufacturer of solid oxide fuel cells in the U.S. Net proceeds from the sales and an April 2020 partial repayment from the company were approximately US$452 million. Our position was initially acquired in 2015, followed by two further investments in 2016 and 2017.
  • Sold our 50% interest in Phase One of Nova, an office-led mixed-used development in London Victoria, U.K. Net proceeds from the sale are expected to be approximately C$720 million. Our ownership interest was initially acquired in 2012.
  • Invested €200 million in Embracer Group, a Sweden-listed developer and publisher active in the global video game industry, for a 3% stake.

About Canada Pension Plan Investment Board
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At September 30, 2020, the Fund totalled $456.7 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.

Disclaimer
Certain statements included in this press release constitute “forward-looking information” within the meaning of Canadian securities laws and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United States safe harbors. All such forward-looking statements are made and disclosed in reliance upon the safe harbor provisions of applicable United States securities laws. Forward-looking information and statements include all information and statements regarding CPP Investments’ intentions, plans, expectations, beliefs, objectives, future performance, and strategy, as well as any other information or statements that relate to future events or circumstances and which do not directly and exclusively relate to historical facts. Forward-looking information and statements often but not always use words such as “trend,” “potential,” “opportunity,” “believe,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions. The forward-looking information and statements are not historical facts but reflect CPP Investments’ current expectations regarding future results or events. The forward-looking information and statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including available investment income, intended acquisitions, regulatory and other approvals and general investment conditions. Although CPP Investments believes that the assumptions inherent in the forward-looking information and statements are reasonable, such statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. CPP Investments does not undertake to publicly update such statements to reflect new information, future events, and changes in circumstances or for any other reason. The information contained on CPP Investments’ website, LinkedIn, Facebook and Twitter are not a part of this press release. CPP INVESTMENTS, INVESTISSEMENTS RPC, Canada Pension Plan Investment Board, L’OFFICE D’INVESTISSEMENT DU RPC, CPPIB and other names, phrases, logos, icons, graphics, images, designs or other content used throughout the press release may be trade names, registered trademarks, unregistered trademarks, or other intellectual property of Canada Pension Plan Investment Board, and are used by Canada Pension Plan Investment Board and/or its affiliates under license. All rights reserved.

SOURCE Canada Pension Plan Investment Board

For further information: Darryl Konynenbelt, Director, Media Relations, T: +1 416 972 8389, [email protected]

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Pandemic to stimulate more active stock investment strategies: Nissay Asset CEO – TheChronicleHerald.ca

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By Hideyuki Sano and Tomo Uetake

TOKYO (Reuters) – Social transformations triggered by the coronavirus pandemic are making index-following, passive stock investments less attractive and could reverse a decline in active stock investments, the chief executive of Nissay Asset Management said.

Hiroshi Ozeki said a recovery to pre-pandemic levels will be difficult for some industries such as restaurants, airlines and train operators.

Energy-intensive sectors also would be pressured by the need to deal with climate change, he added.

“Even after the pandemic is over and even with some government help, they won’t return to where they were,” said the chief of the 13 trillion yen ($125 billion) asset management firm.

“Up until now, passive style has been a vogue – it’s been said to be the most efficient investment. But with that, you are automatically putting your money in those industries with no growth stories,” he said.

Assets held by exchange traded funds (ETFs), among the most convenient passive investments, have been increasing globally over the last decade.

In contrast, active funds, which try to aim for higher returns based on stock picking, have seen large outflows in recent years.

“In the coming few years, active investments are likely to outperform passive ones. The era of active investment may be back,” Ozeki said.

Companies which Nissay scores highly for Environment, Social and Governance (ESG) had done better this year, he said.

Enterprises poised to benefit from the shift to renewable energy would prosper after the United States and Japan join other countries in adopting ambitious targets to achieve carbon neutrality.

U.S. President-elect Joe Biden has committed to net zero emissions by 2050 and Japanese Prime Minister Yoshihide Suga in October set the same goal for Japan.

“Some companies that have committed to 100% renewable power targets, such as Sony and Ricoh, are saying that Japan is now becoming the bottleneck among the developed world in achieving that goal,” he said, citing limited availability and high costs of renewable energy.

“So it means a lot that Suga has made that target. For investors, too, it reduces risk when the government clarifies its long-term goal,” Ozeki said.

Ozeki also said for next year he expected:

* Global share prices to rally further as the pandemic lasts longer than expected, forcing policymakers to continue to support the economy through monetary and fiscal measures.

* Short-term U.S. interest rates to stay low, making currency-hedged dollar bond investments attractive for Japanese investors.

Follow Reuters Summits on Twitter @Reuters_Summits

(For more summit stories, see)  

(Reporting by Hideyuki Sano in Tokyo and Tomo Uetake in Sydney; Editing by Stephen Coates)

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Fall Economic Statement 2020 – Investment Executive

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The federal Liberals are proposing $25 billion in new spending to help Canadian businesses and workers make it through a Covid-19 winter and vowing tens of billions more to help the country recover from the pandemic.


November 30, 2020

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Vancouver investment firm bought under fraudulent circumstances: IIROC – Powell River Peak

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Vancouver-headquartered investment firm PI Financial Corporation was purchased under fraudulent pretences, according to allegations set out in a notice of hearing from Canada’s investment regulator.

The Investment Industry Regulatory Organization (IIROC) alleges Gary Man Kin Ng and Donald Warren Metcalfe duped their lenders, who assisted them in buying PI Financial in 2018 for $100 million.

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Ng personally guaranteed the loans used to buy the firm, however, “despite his representations, Ng did not actually own, control or have trading authority over the securities accounts pledged as collateral,” according to IIROC. “Instead, ownership and control of the collateral was falsified by Ng and Metcalfe.”

Before buying PI Financial, which is said to employ over 300 people across Canada, Ng, 36, was an Approved Person and a Registered Representative for selling securities. He owned a Winnipeg-based firm named Chippingham Financial Group Limited via various corporate structures referred to by IIROC as the Ng Group. In November 2018, Ng, through the Ng Group, acquired a 100% controlling interest in PI Financial, IIROC stated in a notice of hearing that has scheduled a preliminary appearance on January 6, 2021.

Ng is said to have borrowed $80 million from “Lender One” and $20 million from “Lender Two.”
As security for the loans, “Ng purportedly granted separate, unencumbered security interests to Lender One, and also to Lender Two, over collateral including certain Chippingham securities accounts (later PI Financial accounts) which were owned by him,” stated IIROC, adding such representations were fake.

Ng is accused of “vastly overstating” the value of assets in the accounts and altering securities account statements.

“Metcalfe also perpetrated a fraud as he directly and actively participated with Ng in the falsification and distribution of false and/or fictitious account documentation to lenders,” it said in the November 24 notice of hearing.

In addition to the $100 million to buy PI Financial, Ng and Metcalfe borrowed a further $40 million from Lender Two and then $32 million from a third lender – all based on falsified collateral.

Although PI Financial was 100% owned by Ng, company officials “became aware of the issues concerning Ng’s purported ownership of securities accounts at the end of January 2020, and immediately reported these matters to IIROC,” the notice states.

Both men failed to attend an interview with IIROC enforcement staff over the summer.

IIROC said, “Ng, who was born in 1984, represented himself to others as an extremely successful businessperson who created enormous personal wealth through highly successful technology, real estate and manufacturing investments in Canada and China.”

At the time of the PI Financial purchase, Ng spoke of the deal with BNN Bloomberg, whose hosts noted how unique the deal was, given most investment firms are bought by large corporate entities, not individuals.

Metcalfe, meanwhile, was someone who worked initially with Ng at Chippingham.

Some details of the alleged lies are outlined in the notice. For example, several accounts Ng purported to have a value of $91 million actually had a value of $1.9 million.

IIROC proceedings are civil and not criminal. Should the allegations be proven, Ng and Metcalfe face any of the following corrective measures: a reprimand; disgorgement of any losses; a maximum $5 million fine; suspension or prohibition of activities; and a permanent ban from the industry.

gwood@glaciermedia.ca
 

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