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CPP Investment Board posts weakest annual rate of return since 2009 fiscal year

TORONTO – The Canada Pension Plan Investment Board’s annual rate of return dropped to 3.4 per cent last year, the lowest since the Great Recession, the CPPIB said Thursday in its annual report.

However the Toronto-based fund manager, which shepherds investments on behalf of the Canada Pension Plan, says its 10-year inflation-adjusted rate of return was 5.1 per cent — above the Chief Actuary of Canada’s benchmark of 4.0 per cent.

In addition, CPPIB notes that its assets increased over the 12 months ended March 31 by $14.3 billion to $278.9 billion.

By comparison, its 2015 rate of return was 18.3 per cent and the 2014 rate of return was 16.1 per cent — the fund’s best two years since it suffered a 18.8 per cent decline in asset value in the 2009 fiscal year amid a global market meltdown.

“Over the past 12 months, despite one of the more challenging investment environments in recent years and predominately negative equity markets, the CPP Fund generated a moderate gain,” Mark Wiseman, the CPPIB’s out going president and chief executive, said in a statement.

Wiseman has been instrumental in leading CPPIB as it pursued an “active” investment strategy into a variety of assets including real estate, public and private stocks and infrastructure assets around the world.

“In the first 10 years of our active management strategy, we have generated significant value for CPP contributors and beneficiaries, which would not have been earned through a passive portfolio.”

The fund says investments, after costs, have added $125.6 billion cumulatively in the past 10 years, including fiscal 2016. It says 57 per cent of its total assets are from investment income since the fund was created in 1999.

Earlier Thursday, the Canada Pension Plan Investment Board announced that Wiseman is leaving to take a senior role at U.S.-based investment firm BlackRock Inc., which has a total of about US$4.7 trillion in assets under management, including a range of products that includes mutual funds and the iShares exchange-traded funds business.

The U.S. firm said Wiseman will head its global active equity business, which manages US$275 billion, and become chairman of the company’s global investment committee when he joins the company in September.

Under Wiseman, the CPPIB has grown its head office in Toronto and added offices in other financial centres, including one last year in Mumbai, India.

Wiseman will be replaced June 13 by Mark Machin, who currently heads the fund’s international arm.

Machin, 49, joined CPPIB in March 2012. Prior to that, he spent 20 years at investment bank Goldman Sachs.

Heather Munroe-Blum, who chairs the CPPIB board, said the directors were unanimous in selecting Machin, who she said has been instrumental in shaping and executing CPPIB’s investment strategy over the last four years — a period when the fund has invested billions outside of Canada.

Earlier this year, Wiseman was named by the Liberal government as one of 14 members of a new council on economic growth to help advise federal Finance Minister Bill Morneau.

Note to readers: This is a corrected story. An earlier version said Wiseman was named to the council on economic growth this week.