CPP Investments reports $699.6 billion in net assets, exceeding projections by five years

Canada Pension Plan Investment Board (CPP Investments) ended its third quarter on December 31, 2024, with net assets of $699.6bn, an increase from $675.1bn in the previous quarter.

The Fund saw a $24.5bn rise in net assets, with $26.0bn in net income offset by $1.5bn in net Canada Pension Plan (CPP) outflows.

Contributions typically exceed benefits in the early months of the year, while the latter months see benefits surpassing contributions.

For the quarter, the Fund reported a net return of 3.8 percent, contributing to a 10-year annualized net return of 9.2 percent.

Since its inception in 1999, CPP Investments has delivered $487.7bn in cumulative net income.

Over the nine-month fiscal year-to-date period, the Fund increased by $67.2bn, including $55.3bn in net income and $11.9bn in net transfers from the CPP, yielding a net return of 8.6 percent.

CPP Investments exceeded the Office of the Chief Actuary of Canada's original projections for achieving $700bn in net assets by five years.

The projections were based on the 18th and 30th Actuarial Reports on the Canada Pension Plan. Strategic changes in investment approaches contributed to surpassing initial assumptions.

The Fund recorded one of its largest quarterly increases, driven by returns in private equity and credit investments.

However, losses in fixed income, affected by rising US Treasury yields, offset some gains. Volatility, particularly due to the Canadian dollar's depreciation, also influenced overall performance. 

Performance of Base and Additional CPP Accounts 

The base CPP account closed the quarter with $646.2bn in net assets, increasing from $626.1bn. This included $24.6bn in net income and $4.5bn in net base CPP outflows.

The base CPP account's net return for the quarter stood at 3.9 percent, with a five-year annualized net return of 8.1 percent.

The additional CPP account reached $53.4bn in net assets, rising from $49.0bn. The increase consisted of $1.4bn in net income and $3.0bn in net transfers. The additional CPP account reported a net return of 2.8 percent for the quarter and a five-year annualized net return of 5.4 percent.

Its distinct funding and contribution structure, established in 2019, results in a different investment profile and risk target compared to the base CPP.

As a result, its assets are expected to grow at a faster rate. 

Long-Term Financial Sustainability

The Office of the Chief Actuary of Canada evaluates CPP's financial sustainability every three years. The latest triennial review, published in December 2022, confirmed the sustainability of both base and additional CPP accounts over the long term.

The base CPP account is projected to earn an average annual return of 3.69 percent above Canadian consumer price inflation over 75 years, while the additional CPP account is expected to achieve 3.27 percent.

Investment Highlights

• Active Equities: CPP Investments committed €600m for a 1.3 percent stake in DSV A/S to support its acquisition of Schenker AG, expanding its presence in global transport and logistics.
   
• Credit Investments: The Fund invested US$175m in a mezzanine loan for Fontainebleau Miami Beach and committed KRW 473.1bn ($479m) in a separately managed account targeting South Korean real estate credit.
   
• Private Equity: Notable transactions included a US$180m investment in the take-private of Nuvei, a payments provider based in Montreal, and a €50m single-asset continuation fund transaction for Syclef, a European refrigeration and air conditioning firm.
   
• Real Assets: CPP Investments announced a KRW 1tn ($1bn) data centre joint venture in South Korea with Pacific Asset Management Company, committing KRW 276bn ($285m). It also formed a new UK single-family rental housing joint venture with Kennedy Wilson, with an initial commitment of £500m.
   

Debt Issuance and Corporate Developments 

CPP Investments added Cedar Leaf Capital, Canada's first majority Indigenous-owned investment dealer, to its Canadian Dollar syndicate.

It ranked second among 75 pension funds in the 2024 Global Pension Transparency Benchmark and received the Australian Market Achievement of the Year award from KangaNews for its A$4.2bn issuance in the Australian Dollar Market.

The organisation also affirmed its support for the Canadian Sustainability Disclosure Standards, emphasizing their importance in global capital markets.

Transactions Following the Quarter

Post-quarter investments included a US$80m stake in Kestra, a US wealth management platform, and a US$517m multi-asset continuation vehicle with PSG Equity LLC.

The Fund also signed agreements to exit its 33.3 percent equity share in the Goodman UK Partnership, generating net proceeds of £182m, and to sell its 49 percent interest in four joint ventures with Longfor Group Holdings for $235m.

To view the full report, visit here.