Canada Pension Plan Investment Board says the value of its main fund fell by $2.4 billion during the three months ended Dec. 31, to $298.1 billion, due to a combination of seasonal and market factors.
The Toronto-based fund manager says a major reason for the decline was a $4.1-billion cash outflow to pay for benefits covered by the Canada Pension Plan.
Those payments exceeded the $1.7 billion of investment income during the Canada Pension Plan Investment Board’s (CPPIB) fiscal third quarter.
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CPPIB says the Canada Pension Plan usually collects more in contributions from employees and employers than required to pay current benefits, but the trend sometimes reverses in the later months of a calendar year.
It also described investment returns during the October-December quarter as “modest” — reflecting the largest quarterly decline in North American fixed-income markets since CPPIB was created.
As a result, the portfolio delivered just 0.64 per cent gross investment return for the quarter, or 0.56 per cent after all costs.
The quarter’s rate of return was below the long-term level required to sustain the Canada Pension Plan over the coming decades, but CPPIB says its nine-month rates of return to the end of December were above the required levels.
In September, the Chief Actuary of Canada projected that the pension system will remain sustainable at current contribution rates if inflation-adjusted rates of return average 3.9 per cent over 75 years.
In the first nine months of CPPIB’s 2016-17 financial year, the gross rate of return was 7.1 per cent and the net rate of return was 6.9 per cent. The value of the fund was up 19.2 billion from $278.9 billion on March 31, when the previous financial year ended.
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