Canada Pension Plan Offers a Lesson in Investing

The Canada Pension Plan fund is one of the world's best investors, showing sterling returns in the worst decade for investing we've seen in the past 200 years. But nobody outside the investing community seems to know about it. If you’re worried about your government pension in the future, don’t be. The Canada Pension Plan is doing very well, thank you. And it will continue to do so for the next 60 years or so.

Canada Pension Plan Savings | BCBusiness
The Canada Pension Plan’s fund hit a record high of $161.6 billion last year.

The Canada Pension Plan fund is one of the world’s best investors, showing sterling returns in the worst decade for investing we’ve seen in the past 200 years. But nobody outside the investing community seems to know about it.

If you’re worried about your government pension in the future, don’t be. The Canada Pension Plan is doing very well, thank you. And it will continue to do so for the next 60 years or so.

The plan’s fund hit a record high of $161.6 billion last year, a 6.6-per-cent increase over the previous year (which in turn showed an 11.9-per-cent increase over its previous year).

Seems to me a 6.6-per-cent increase is very good, considering what kind of year it was for most investors, what with European turmoil and the lingering U.S. recession, etc. And it’s astonishing that the fund returned 11.9 per cent the previous year, which wasn’t so hot either.

Actually, most of the last decade has been abysmal, investment-wise. But the Canada Pension Plan has been storing away bags of money ever since it was created in 1997, and now has enough to last the plan well into this century.

In the last 10 years alone, the Canada Pension Plan’s average return has been 6.2 percent, 50 per cent above its mandated 4 per cent needed to confirm its sustainability. This came in a decade that was the worst for equity performance in more than 200 years.

Now, the CPP Fund is one of the biggest investor funds in the world, called upon often to join high-powered venture-capital groups in Silicon Valley and elsewhere in huge investment plays. A recent report on the plan showed it had more than 60 major investments around the world.

The CPP fund is a great Canadian story, similar to our banking prowess – except that most people have heard we’re great on banking but not that there are considerable investing skills here. While the U.S. languishes in debt and conducts continual internal fiscal warfare, the CPP is showing the world what prudent investing is all about.

Its portfolio is a potent mix of quality debt instruments and public and private equities (its second-largest holding at almost $455 million is Apple Inc.) that reads as a lesson for anyone who wants to invest.

No wild flyers; no jumping on bandwagons; no involvement in frenzies. Just lots of long-term thinking, astute investing and steady returns.  

I’m guessing you won’t see the Canada Pension Plan take part in the Facebook IPO, which is rocking the investment world right now. The company hasn’t proven itself yet.