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CPPIB Overtakes the Caisse?
Karen Mazurkewich of the National Post reports, CPPIB sees big jump in assets-under-management in Q2:
It
wasn’t just the stock markets that added $8.9-billion to the coffers
of the Canada Pension Plan Investment Board for the quarter that ended
in September.“Every asset class around the world had positive
results,” said David Denison, chairman of CPPIB. The pension plan ended
its fiscal second quarter with $138.6-billion in
assets-under-management, up from $123.8-billion this time last year
thanks to gains across all asset classes including a 14% hike in
emerging markets.
The jump meant a 6.6% return-on-investment, and $500-million in new contributions by Canadians.
The
pension plan — now the largest in Canada — will continue to focus on
private investment opportunities such as the co-investment play it made
with Onex Corp. to purchase the U.K. bathroom and auto parts company
Tomkins. But Mr. Denison said infrastructure assets and real estate buys “are very much in.”
The pension plan is hoping to soon close its deal with
Australian-based Intoll Group (formerly Macquarie Infrastructure
Group), which owns a 30% stake in the 407 Express Toll Highway in
Ontario, as well and additional 10% stake in the highway it is acquiring
from the Spanish company Cintra. Such buys — not to mention the bevy
of real estate deals the pension fund has signed over the last year —
have had a significant impact on our asset mix, added Mr. Denison. “We
have to focus on large transactions because we have a large fund,” he
added.
The fund went on a real estate shopping spree of the last
year, most recently buying up two historic properties in Washington
D.C., and minority stakes in two Manhattan office towers, including the
50-story building in the Rockefeller Center complex. CPPIB has also
been active in the Australian real estate market, making a $375 million
investment in Colonial First State Global Asset Management, and
co-investing in a new fund with the Australian-based Goodman Group. The
funds buys have tallied over $1.5-billion in 2010.
CPPIB is
also flexing its muscle in the private debt asset class. “We are seeing
lots of need in public companies to secure debt financing. We have
$2-billion invested in the last 18 months, and we will continue to be
active.
Next up: expanding the fund’s presence in developing markets, he added.
The
CPPIB manages the national pension plan for Canadian beneficiaries.
Following the economic crisis, the federal Finance Minister Jim
Flaherty, and his provincial counterparts, have been exploring a pension
reform option that would see an expansion of the defined benefits
under the CPP in order to increase savings adequacy in the future.
Pension reform will be one of the key topics to be addressed during the
federal and provincial finance ministers meeting scheduled for
December 19-20. “We hope there is a set of priorities that come of
their deliberations,” said Mr. Denison.
You can read CPPIB's latest press release by clicking here.
The results are impressive but not surprising given how strongly global
markets, especially the US market, performed during their second
quarter (ending September 30th):
For the six month fiscal
year-to-date period, the CPP Fund has increased by $11 billion from
$127.6 billion at March 31, 2010. This increase in assets after
operating expenses is comprised of $6.7 billion in investment income
representing a 5.2% rate of return combined with contributions of $4.3
billion.“All major equity
market indices realized gains this quarter, in particular U.S. markets,
which posted their best September results in 70 years,” said David
Denison, President and CEO, CPP Investment Board.For
the five-year period ended September 30, 2010, the CPP Fund generated
an annualized investment rate of return of 3.4% or $18.3 billion of
investment income. For the 10-year period ended September 30, 2010, the
Fund generated $44 billion of investment income reflecting an
annualized rate of return of 5.5%.
September was indeed an excellent month for global equities, with the S&P 500 posting a gain of 8.8% and with 27 of 45 global markets posting double-digit returns. In other words, the global beta boost benefited all pensions that are long stocks.
CPPIB's impressive returns also had some asking, CPP v. Caisse: Who's the biggest?:
For
years the Caisse de dépôt et placement du Québec has been Canada's
biggest investor, managing the assets of an assortment of public and
private pension funds in Quebec. When it last reported its financial
results as of June 30 this year, it had assets under management
totalling $135.8-billion.
But the Canada Pension Plan is taking
a run at the title. The fund, whose assets are managed by the Canada
Pension Plan Investment Board, reported its financial results
Wednesday, disclosing its assets grew by $8.9-billion to $138.6-billion
in the fiscal second quarter ended Sept. 30. Advantage CPPIB.
But
before anyone puts the gold medal around CEO David Denison's neck, we
have to wait to see what the Caisse reports for its 2010 returns.
Unlike the CPPIB, which reports its results quarterly, the Caisse only
opens its books twice a year. That means investors will know early next
year where the Caisse's assets stand as of Dec. 31.
Although the CPPIB has the advantage of having new contributions pour in
while it does not have to use its assets to fund pensions until 2021,
smart money might bet on the Caisse to stay biggest for a while longer.
If the Caisse earned the same 6.6 per cent return as the CPPIB in the
quarter ended Sept. 30, its asset level would have topped $144-billion
by that date.
The year is far from over, and pension funds
often earn significantly different returns in the same periods,
depending on where they have more and less of their assets invested. So
things could change. And the CPPIB can still brag about being Canada's
largest single-purpose investment fund, which means it is a single
fund and not an agglomeration of various pension plans like the Caisse.
With the S&P/TSX composite index up 14 per cent since June
30 -- and U.S. markets posting their best September returns in 70
years -- it hardly matters which fund stands biggest by Dec. 31. The
biggest winners will be the plan members.
And with QE2 now entering its first phase, I think pensions will keep delivering impressive returns. In fact, yesterday Bloomberg reported that assets at the New York State
pension fund, the third largest in the U.S., expanded to $132.8 billion
at Sept. 30 as the value of investments grew 8 percent on rising prices
for equities, Comptroller Thomas P. DiNapoli said.
As far as
"who's the biggest?", my only thought is WHO CARES??? In fact, at one
point I believe size becomes an issue at these behemoth funds and they
should be cut in half to keep them lean, mean and focused. I have seen
many big funds lose their edge, especially when the beta tide goes into
reverse. Hope this isn't going to happen to either CPPIB or the Caisse,
but in this new normal, bigger isn't always better.
»
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Hmmm... Rockefeller Center, that one's been a huge money-maker over the years.
EURO daily chart bearish warnings continue.
US Dollar daily chart bullish warnings continue.
http://stockmarket618.wordpress.com
Where is the old Leo?.. this raise in assets is in line with market moves, as far as I can tell. - This partcular PF doesn't start paying out pensions till 2021? - could the example be any more optimistic. - As you first pointed out, it is the pension obligations related to cost of living, against 'rate of return' which is the material issue.
And it is a big one..state pensions, food prices, oil prices, house rents, automobile technology mark-ups...the two things that are cheaper now than in 2008 are house prices and shipping costs. ..this pension fund is siding with inflation, a toll road and a managed fund office. ..this QE2 may keep Pensions alive for maybe five years or more, after which, what are we going to do about inflation? ..the risk here is that Pensions could just stop issuing new policies and that people will have to fund their own retirement, in a marketplace that will simply rip their faces off.
Buying real estate and going long the equities market?
Isn't this what got them in trouble in the first place?
How much is 8.8% this year worth if next year or the year after we are 40% below where we are today because massive pension funds and governments are propping up real estate and equities?
Oy Vey!
Awfully big gambles to be making with people's pensions.
Shhhhhh. 2011 will be a junk blood bath.
Fool them once. Fool them twice. Fool them thrice. Fool them...
Take moral hazzard away and dump the blow on the mirror. Life is 'good.'