The Canada Pension Plan Investment Board (CPPIB; french: Office d'investissement du régime de pensions du Canada), operating as CPP Investments (french: Investissements RPC), is a Canadian
Crown corporation established by way of the 1997 ''Canada Pension Plan Investment Board Act'' to oversee and invest the funds contributed to and held by the
Canada Pension Plan (CPP).
CPP Investments is one of the world's largest investors in
private equity
In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a t ...
, having invested over
US$
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
28.1 billion between 2010 and 2014 alone. Despite being a Crown corporation, CPPIB is not considered a
sovereign wealth fund
A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as ...
because it operates at
arm's length
The arm's length principle (ALP) is the condition or the fact that the parties of a transaction are independent and on an equal footing. Such a transaction is known as an "arm's-length transaction".
It is used specifically in contract law to ar ...
from the
Government of Canada
The government of Canada (french: gouvernement du Canada) is the body responsible for the federal administration of Canada. A constitutional monarchy, the Crown is the corporation sole, assuming distinct roles: the executive, as the ''Crown ...
and solely manages CPP contributions paid by workers and employers, not public funds.
As of June 30, 2022, the CPP Investment Board manages over
C$523 billion in
assets under management for the Canada Pension Plan on behalf of 20 million Canadians.
History
The
Canada Pension Plan was first established in 1966. For much of its history, the plan relied on contributions to pay benefits. By 1996, the federal government had determined that the CPP as then constituted was unsustainable.
Changes were made to the plan, gradually increasing the contribution rate to its current 9.9% and creating the CPP Investment Board.
Under the direction of then
Minister of Finance
A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation.
A finance minister's portfolio has a large variety of names around the world, such as "treasury", " ...
Paul Martin
Paul Edgar Philippe Martin (born August 28, 1938), also known as Paul Martin Jr., is a Canadian lawyer and politician who served as the 21st prime minister of Canada and the leader of the Liberal Party of Canada from 2003 to 2006.
The son o ...
, the CPP Investment Board was created by an
Act of Parliament
Acts of Parliament, sometimes referred to as primary legislation, are texts of law passed by the Legislature, legislative body of a jurisdiction (often a parliament or council). In most countries with a parliamentary system of government, acts of ...
in 1997 as an independent, but accountable, body to monitor the funds held by the Canada Pension Plan. The CPP Investment Board began its investing program in 1999, establishing the CPP Reserve Fund to hold investment earnings and CPP contributions not needed to pay current pensions. It reports quarterly to the public on its performance, has a professional
board of directors to oversee the operations of the CPP reserve fund, and also to plan changes in direction. As a
Crown corporation, the CPP Investment Board is accountable to
Parliament
In modern politics, and history, a parliament is a legislative body of government. Generally, a modern parliament has three functions: representing the electorate, making laws, and overseeing the government via hearings and inquiries. Th ...
and reports annually through the Minister of Finance. While accountable to Parliament, the CPP Investment Board is not controlled by the government or subject to government appointments, its employees and directors are not part of the
Public Service of Canada. CPPIB is a partner of the
World Economic Forum
The World Economic Forum (WEF) is an international non-governmental and lobbying organisation based in Cologny, canton of Geneva, Switzerland. It was founded on 24 January 1971 by German engineer and economist Klaus Schwab. The foundation, ...
.
Mandate
The CPP Investment Board's mandate is laid out in its founding legislation, the ''Canada Pension Plan Investment Board Act'' (
S.C. 1997, c. 40). Its sole investing mandate is to achieve a "maximum rate of return, without undue risk of loss."
Investments
The CPP Investment Board invests in
private equity
In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a t ...
,
public companies
A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange (list ...
, and
real estate
Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...
. The CPPIB invests in real estate and made their first direct office investment in Seattle in 2016. Notable investments include 50% of the
American pet store
A pet shop or pet store is a retail business which sells animals and pet care resources to the public. A variety of animal supplies and pet accessories are also sold in pet shops. The products sold include: food, treats, toys, collars, leashes, c ...
chain
Petco
Petco Health and Wellness Company, Inc. is an American pet retailer with corporate offices in San Diego and San Antonio. Petco sells pet food, products, and services, as well as certain types of live small animals.
Founded in 1965 as a mail-ord ...
,
50% of American luxury
department store
A department store is a retail establishment offering a wide range of consumer goods in different areas of the store, each area ("department") specializing in a product category. In modern major cities, the department store made a dramatic app ...
chain
Neiman Marcus
Neiman Marcus Group, Inc. is an American integrated luxury retailer headquartered in Dallas, Texas, which owns Neiman Marcus, Bergdorf Goodman, Horchow, and Last Call. Since September 2021, NMG has been owned by a group of investment compani ...
, 50% of
Australian office tower development
International Towers Sydney
The International Towers is a commercial skyscraper complex in central Sydney, in the Barangaroo area. The complex comprises three main office towers; Tower 1 at 217 metres (712 ft), Tower 2 at 178 metres (584 ft), and Tower 3 at 168 metres (55 ...
, 50.01% of the
Ontario Highway 407 toll highway
A toll road, also known as a turnpike or tollway, is a public or private road (almost always a controlled-access highway in the present day) for which a fee (or '' toll'') is assessed for passage. It is a form of road pricing typically implemente ...
,
21.5% of
South Korea
South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korean Peninsula and sharing a land border with North Korea. Its western border is formed by the Yellow Sea, while its eas ...
n
discount store
A discount store or discounter offers a retail format in which products are sold at prices that are in principle lower than an actual or supposed "full retail price". Discounters rely on bulk purchasing and efficient distribution to keep down cost ...
chain
Homeplus, and 19.8% of multinational media corporation
Entertainment One. Other prominent investments are made in Indian companies
Byju's,
Delhivery
Delhivery is an Indian logistics and supply chain company, based in Gurugram. It was founded in 2011 by Sahil Barua, Mohit Tandon, Bhavesh Manglani, Suraj Saharan, and Kapil Bharati. The company has over 85 fulfillment centers, 24 automated so ...
, Embassy Office Parks, Eruditus,
Power Grid Corporation of India,
SBI Life Insurance Company
SBI Life is an Indian life insurance company which was started as a joint venture between State Bank of India (SBI) and French financial institution BNP Paribas Cardif. SBI has a 55.50% stake in the company and BNP Paribas Cardif owns a 0.22% s ...
etc.
As outlined in its Policy on Responsible Investing, first adopted in 2005, the Board considers environmental, social and governance (ESG) issues/factors from a risk/return point of view and encourages companies to adopt policies and practices that enhance long-term financial performance.
Future and direction
John Graham is the current Chief Executive Officer of the CPPIB, replacing
Mark Machin
Mark Machin (born 1966) is a British investor who served as President and CEO of the Canada Pension Plan Investment Board between 2016 and 2021.
Machin is currently a non-executive director for Serendipity Capital, a Singapore-based venture capit ...
on February 26, 2021.
Mark Machin
Mark Machin (born 1966) is a British investor who served as President and CEO of the Canada Pension Plan Investment Board between 2016 and 2021.
Machin is currently a non-executive director for Serendipity Capital, a Singapore-based venture capit ...
resigned after traveling to the
United Arab Emirates
The United Arab Emirates (UAE; ar, اَلْإِمَارَات الْعَرَبِيَة الْمُتَحِدَة ), or simply the Emirates ( ar, الِْإمَارَات ), is a country in Western Asia ( The Middle East). It is located at t ...
to receive a
COVID-19 vaccine. Prior to Machin,
Mark Wiseman
Mark Wiseman is a businessman and financier. He is currently the chair of the Alberta Investment Management Corporation. He was formerly a manager at BlackRock. Prior to 2016, Wiseman was President and CEO of the Canada Pension Plan Investment Bo ...
was CEO until June 13, 2016.
According to the 2013 Annual Report, about 63% of the fund's assets are now invested outside Canada, largely in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
, Europe and Asia. In addition, the CPPIB has been broadening the scope of its investments to include emerging markets, although
David Denison, CEO at the time, would not pinpoint a specific country or area. "Canada as a single market cannot accommodate the future growth of our organization," said Denison.
In recent years, the CPPIB changed direction in its investment philosophy. It evolved from investing exclusively in non-marketable government bonds to passive index-fund strategies and, in 2006, to active investment strategies.
Growth and strategy
According to the Office of the
Chief Actuary of Canada, the CPP Fund needs a real rate of return of 4.0%, over the 75-year projection period in his report, to help sustain the plan at the current contribution rate.
In December 2013, the Chief Actuary reaffirmed that the CPP is sustainable throughout the 75-year timeframe of his 2012 report. Over this long timeframe it is expected that there will be periods where returns are above or below this threshold.
Consistent with the CPPIB's mandate to maximize investment returns without undue risk of loss, they pursue a
value-added
In business, total value added is calculated by tabulating the unit value added (measured by summing unit profit sale price and production cost">Price.html" ;"title="he difference between Price">sale price and production cost], unit depreciation ...
strategy that seeks to deliver returns over and above a market-based benchmark over the long term. That benchmark is called the CPP Reference Portfolio and under reasonable capital market assumptions, it can generate the long-term 4.0% real rate of return required to help sustain the CPP.
The CPPIB reserve fund receives its funds from the CPP and invests them like a typical large fund manager would. The CPP reserve fund seeks to achieve at least the projected return (
inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...
-adjusted) needed to help sustain the CPP , a rate set at 4.0% by 2017 in the CPP actuary's report, starting from 3.2% in 2011. As indicated in its Financial Highlights for the fiscal year ended March 31, 2013, the CPP reserve fund averaged 4.2% return in the past 5 years, and a 7.4% return in the past 10 years, above the sum of projected Canadian inflation rates and the 4.0% target identified by the CPP Actuary report, or 6.3% in nominal basis, that is required for CPP contribution sustainability.
The CPP total assets are projected to reach the following levels according to the 2021 actuarial report: (in assets):
* $671 billion by 2025.
* $991 billion by 2030.
* $1,959 billion by 2040.
* $3,562 billion by 2050.
The strategies used to achieve these targets are:
*
Diversification
Diversification may refer to:
Biology and agriculture
* Genetic divergence, emergence of subpopulations that have accumulated independent genetic changes
* Agricultural diversification involves the re-allocation of some of a farm's resources to ...
. In 1997, the CPP fund was 100% invested in government bonds, but it has since diversified not only by asset class, but also internationally.
*Employing basic
asset allocation
Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment t ...
theories, with diversification of investments as one of the objectives. The asset mix has evolved over the years as follows:
*Using equity firms to assist in achieving targets for each asset class. The CPP reserve fund allocates certain amounts to various pre-qualified
equity firms to be managed and used towards reaching the growth targets. For example, the CPP Investment Board hires private equity firms to help it invest in private companies, fund managers to help it invest in public equities, bond managers to assist in investing in
bonds (within Canada and foreign bonds), and so forth.
Significant transactions
CPPIB, as part of a consortium, first invested US$300 million in
Skype
Skype () is a proprietary telecommunications application operated by Skype Technologies, a division of Microsoft, best known for VoIP-based videotelephony, videoconferencing and voice calls. It also has instant messaging, file transfer, deb ...
in September 2009. In May 2011 CPPIB sold its stake in Skype to
Microsoft
Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washin ...
for US$1.1 Bn before debt repayment,
[CPPIB scoops windfall as Microsoft buys Skype for $8.5-billion]
The Globe and Mail. Retrieved on 2013-07-26. or US$933 million.
In 2009 CPPIB also invested in the $5.2-billion purchase of
IMS Health
IMS Health was an American company that provided information, services and technology for the healthcare industry. IMS stood for Intercontinental Medical Statistics. It was the largest vendor of U.S. physician prescribing data. IMS Health was fo ...
with
Texas Pacific Group
TPG Inc., previously known as Texas Pacific Group and TPG Capital, is an American investment company based in Fort Worth, Texas. The private equity firm is focused on leveraged buyouts and growth capital. TPG manages investment funds in growth ...
and the $2.1-billion purchase of
Macquarie Communications Group.
[
In 2012 CPPIB acquired a 45% stake in ten shopping centers and two redevelopment sites from ]Westfield Group
Westfield Group was an Australian shopping centre company that existed from 1960 to 2014, when it split into two independent companies: Scentre Group, which owns and operates the Australian and New Zealand Westfield shopping centre portfolio ...
. CPPIB's equity investment was $1.8 billion and the total gross value of the properties was $4.8 billion.
In May 2015, Unibail-Rodamco
Unibail-Rodamco-Westfield SE (previously Unibail-Rodamco SE) is a French commercial real estate company headquartered in Paris, France. Its history originates with the formation of two separate shopping centre operators, Unibail (founded in Fran ...
revealed it had signed an agreement with the Canada Pension Plan Investment Board to sell its 46.1 percent stake in German
German(s) may refer to:
* Germany (of or related to)
** Germania (historical use)
* Germans, citizens of Germany, people of German ancestry, or native speakers of the German language
** For citizens of Germany, see also German nationality law
**Ge ...
shopping mall operator MFI AG for €394 million.
In May 2015, the sale of a joint 70% investment with BC Partners
BC Partners is a British international investment firm with over $40 billion of assets under management across private equity, credit and real estate in Europe and North America. Its global headquarters are in London. The firm invests across all ...
in U.S. cable television operator Suddenlink
Suddenlink was an American telecommunications subsidiary of Altice USA trading in cable television, broadband, IP telephony, home security, and advertising. Prior to its acquisition by Altice, the company was the seventh largest cable operator wi ...
for over US$9 Bn to Altice was also announced. The interest had been acquired in a 2012 leveraged buyout
A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money ( leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loa ...
.
In June 2015, CPPIB announced it would acquire GE Capital
GE Capital is the financial services division of General Electric.
The company currently only runs one division, GE Energy Financial Services. It had provided additional services in the past; however, those units were sold between 2013 and 2018. ...
's private equity lending portfolio for $12 billion.
In October 2015, CPPIB announced plans to acquire Encana
Ovintiv Inc. is a hydrocarbon exploration and production company organized in Delaware and headquartered in Denver, United States. It was founded and headquartered in Calgary, Alberta, under its previous name Encana. It was the largest energy c ...
's Denver-Julesberg Basin Colorado oil and gas assets for $900 million (US). The deal, with Denver-based partner, private equity firm The Broe Group, having a 5% share in the new Crestone Peak Resources partnership, was completed in July 2016. Broe will manage the portfolio of more than 1600 wells.
In November 2015, CPPIB and CVC Capital Partners acquired American pet supplier Petco
Petco Health and Wellness Company, Inc. is an American pet retailer with corporate offices in San Diego and San Antonio. Petco sells pet food, products, and services, as well as certain types of live small animals.
Founded in 1965 as a mail-ord ...
in a deal worth $4.6 billion.
In July 2016, CPPIB and Calgary-based Wolf Midstream Inc. purchased a 50% stake in Devon Energy
Devon Energy Corporation is an energy company engaged in hydrocarbon exploration in the United States. It is organized in Delaware and its corporate operative headquarters are in the 50-story Devon Energy Center in Oklahoma City, Oklahoma. Its ...
's Access Pipeline located in Alberta
Alberta ( ) is one of the thirteen provinces and territories of Canada. It is part of Western Canada and is one of the three prairie provinces. Alberta is bordered by British Columbia to the west, Saskatchewan to the east, the Northwest Ter ...
.
In September 2016, CPPIB and Cinven
Cinven is a global private equity firm founded in 1977, with offices in nine international locations in Guernsey, London, New York, Paris, Frankfurt, Milan, Luxembourg, Madrid, and Hong Kong that acquires Europe and United States based corporat ...
acquired the business-to-business accommodation wholesaler Hotelbeds for a purchase price of around €1.3 billion.
In October 2019, CPPIB announced to invest alongside KKR in acquiring stake in German Axel Springer SE
Axel Springer SE () is a German digital and popular periodical publishing house which is the largest in Europe, with numerous multimedia news brands, such as '' Bild'', ''Die Welt'', and '' Fakt'' and more than 15,000 employees. It generated t ...
. CPPIB's financial commitment will be at least €500 million.
Performance
The performance and the market value of the CPP Fund is reported on a quarterly basis.
Investments held by the CPP Fund include equities, fixed income (primarily government bonds), and inflation-sensitive assets (real estate, inflation-linked bonds and infrastructure). The CPPIB is making a major push into real estate, especially real estate in India.
Historical information on the performance of assets available to the Canada Pension Plan, and financial statements of the CPP Investment Board, can be found under the Quarterly Reports and Annual Reports section of the CPPIB's website.
The total growth of the CPP Reserve Fund is derived from the CPP contributions of working Canadians, and the return on investment of the contributions. The portion of CPP Reserve Fund growth due to CPP contributions varies from year to year, but have shown a slight decrease in the past 3 years. The historical growth with the investment performance is tabulated as follows:
¹Assets are as at the period end date (March 31).
²Commencing in fiscal 2007, the rate of return reflects the performance of the CPP Fund which excludes the short-term cash required to pay current benefits.
³Increased fund value due to worker and employer CPP contributions not needed to pay current benefits. The negative investment return amounted to $303 million CAD.
Board of directors
* Heather Munroe-Blum
*Sylvia Chrominska
*Dean Connor
*William ‘Mark’ Evans
*Ashleigh Everett
*Tahira Hassan
*Chuck Magro
*John Montalbano
*Barry Perry
*Mary Phibbs
*Boon Sim
*Kathleen Taylor
Criticism
In 2009 executives of the Canada Pension Plan Investment Board took a 31.4% cut in their bonuses after questions were raised about the level of compensation at the crown corporation.
As worldwide concern for global climate change implications increasingly call on institutional divestment from fossil fuels, CPPIB has also been criticized for failing to do so, both on climate grounds and financial loss.
In May 2019, Conservative
Conservatism is a cultural, social, and political philosophy that seeks to promote and to preserve traditional institutions, practices, and values. The central tenets of conservatism may vary in relation to the culture and civilization in ...
MP Tom Kmiec
Tomasz Kmiec (kuh-MICH; born July 31, 1981) is a Polish-Canadian politician who serves the Member of Parliament for Calgary Shepard in the House of Commons of Canada. Additionally, he is the Conservative Party of Canada's National Caucus Chai ...
(Calgary Shepard
Calgary Shepard is a federal electoral district in Alberta, Canada, that has been represented in the House of Commons of Canada since 2015.
Calgary Shepard was created by the 2012 federal electoral boundaries redistribution and was legally def ...
) criticized the CPPIB during a meeting of the Canadian House of Commons Standing Committee on Finance The House of Commons Standing Committee on Finance (FINA) is a standing committee of the House of Commons of Canada.
Mandate
*pre-budget consultations
*briefing sessions by departmental officials on federal government programs
*examination of plann ...
for its indirect investments in two Chinese firms, Hikvision and Dahua Technology
Zhejiang Dahua Technology Co., Ltd. is a partly state-owned publicly traded company based in Binjiang District, Hangzhou, which manufactures video surveillance equipment. It was founded and controlled by Fu Liquan. Dahua Technology has been lis ...
, which supply surveillance technology to the Chinese government used to repress Uyghurs
The Uyghurs; ; ; ; zh, s=, t=, p=Wéiwú'ěr, IPA: ( ), alternatively spelled Uighurs, Uygurs or Uigurs, are a Turkic ethnic group originating from and culturally affiliated with the general region of Central and East Asia. The Uyghur ...
in China's western Xinjiang
Xinjiang, SASM/GNC: ''Xinjang''; zh, c=, p=Xīnjiāng; formerly romanized as Sinkiang (, ), officially the Xinjiang Uygur Autonomous Region (XUAR), is an autonomous region of the People's Republic of China (PRC), located in the northwest ...
region. CPPIB CEO Mark Machin stated that the holdings are part of indices which CPPIB invests in and that those investments had been red-flagged for potential future divestment.
The firms former CEO Mark Machin
Mark Machin (born 1966) is a British investor who served as President and CEO of the Canada Pension Plan Investment Board between 2016 and 2021.
Machin is currently a non-executive director for Serendipity Capital, a Singapore-based venture capit ...
resigned as a consequence of controversy surrounding his choice to receive the COVID-19 vaccine in the United Arab Emirates
The United Arab Emirates (UAE; ar, اَلْإِمَارَات الْعَرَبِيَة الْمُتَحِدَة ), or simply the Emirates ( ar, الِْإمَارَات ), is a country in Western Asia ( The Middle East). It is located at t ...
, whilst Canada was still struggling to acquire vaccines. Mark Wiseman
Mark Wiseman is a businessman and financier. He is currently the chair of the Alberta Investment Management Corporation. He was formerly a manager at BlackRock. Prior to 2016, Wiseman was President and CEO of the Canada Pension Plan Investment Bo ...
, Machin's predecessor, was fired from his role subsequent to his time at CPPIB. At BlackRock
BlackRock, Inc. is an American multi-national investment company based in New York City. Founded in 1988, initially as a risk management and fixed income institutional asset manager, BlackRock is the world's largest asset manager, with trill ...
, Wiseman was seen as a potential successor to Larry Fink
Laurence Douglas Fink (born November 2, 1952) is an American billionaire businessman. He is the chairman and CEO of BlackRock, an American multinational investment management corporation. BlackRock is the largest money-management firm in the w ...
, but a whistleblower outed his romantic affair with a BlackRock
BlackRock, Inc. is an American multi-national investment company based in New York City. Founded in 1988, initially as a risk management and fixed income institutional asset manager, BlackRock is the world's largest asset manager, with trill ...
employee.
See also
* Caisse de dépôt et placement du Québec
* Public Sector Pension Investment Board
The Public Sector Pension Investment Board (PSP Investments) is a Canadian Crown corporation established by an act of Parliament in September 1999. PSP Investments is one of Canada's largest pension investment managers, with CAD $204.5 billion of ...
* OMERS
The Ontario Municipal Employees Retirement System (OMERS) is a Canadian public pension fund, headquartered in Toronto, Ontario. OMERS is a defined benefit, jointly sponsored, multi-employer public pension plan created in 1962 by Ontario provinc ...
References
External links
Official website
{{authority control
1997 establishments in Ontario
Financial services companies established in 1997
Canadian companies established in 1997
Investment in Canada
Canada Pension Plan
Investment management companies of Canada
Social security in Canada
Federal departments and agencies of Canada
Canadian federal Crown corporations
Companies based in Toronto