Whether they realized it or not, many Canadians did rather well in 2012 investing in companies that included Nintendo, Rolls Royce and MasterCard.
The odds are also good that many of us will one day reap the benefits of our holdings in Australian shopping malls, toll roads in Chile and the sale of a $964-million stake in Skype, which were just three of the more notable deals that passed last year through the ledgers of the Canada Pension Plan.
The fund behind Canada's largest single-purpose pension was worth just over $170 billion by the end of 2012, up from some $152 billion in 2011, partly on the strength of investments that include overseas real estate and infrastructure, according to the Canada Pension Plan Investment Board.
The Toronto-based board has since 1997 invested the pension's funds on behalf of the government — tasked with helping keep the CPP, a key ingredient of so many retirement plans, in the black.
Residents of Quebec are paid through a separate pension, the QPP, which is Canada's second largest pension fund and is managed by Caisse de dépôt et placement du Québec. The Caisse, which manages not just the QPP but several other public pension and insurance plans, is also an aggressive investor in a wide range of domestic and international ventures, with net assets totalling $165.7 billion as of June 30, 2012.
CPPIB's investments returned 6.6% for the end of its last fiscal year, back in March; just above the 4%-plus-inflation the bookkeepers say is needed to keep the fund sustainable at current contribution levels.
CPPIB and other public Canadian pension funds, such as the Ontario Teachers' Pension Plan, are these days out-performing public pensions elsewhere in the world.
The investment income isn't currently needed to maintain pension payments. Those expenses are covered by CPP contributions, though that is expected to change in 2021. By that time, "a small portion" of the investment income will be needed to make ends meet, according to CCPIB.
That and the overall poor state of retirement savings among Canadians have led to calls for changes to CPP.
Last year saw CPPIB invest in AMP Capital Retail Trust, which is part owner of two prominent Australian shopping malls. It also paid $1.1 billion for a near-majority stake in five toll roads in Chile and almost tripled its initial investment in Skype when the online video call service was bought by Microsoft.
Those deals are in keeping with a trend at pension funds away from public equity. CPPIB's newly appointed and well-regarded CEO, Mark Wiseman, has said private equity, real estate and infrastructure are a better fit for the long view and relatively risk-averse tastes of CPPIB.
CPP's holdings in publicly traded companies amounted to 33.2% of the portfolio in June 2012, down from 45.7% in June 2009.
CPPIB is also gradually adding more international investments. About 40% of its portfolio was Canadian in 2012, and though the board says "a large part" of the fund will remain invested at home, the need for a diverse portfolio will over time see more of its cash go overseas.
