CPPIB earns 8% return, lowers real estate exposure after offices take hit

financialpost.com:

Canada Pension Plan Investment Board earned an eight per cent return in the fiscal year ended March, as double-digit gains in stocks, credit and private equity made up for weaker performance in emerging markets and real estate.

The fund recorded a five per cent loss on its real estate holdings and blamed high interest rates and work-from-home trends that have damaged the value of office properties globally.

“Most of the losses were in the office sector, given the additional impact of changes in workplace trends,” it said in its annual report. The country’s largest pension manager again reduced its exposure to property to about eight per cent of total assets as of March 31, down from nine per cent a year earlier. Five years ago, it was 12 per cent.

Canada’s biggest pension funds have been major owners of real estate, including prime office towers, for decades, but some are now adjusting their strategies. CPPIB has recently sold its interests in a pair of Vancouver towers, a business park in Southern California and a redevelopment project in Manhattan, with the latter offloaded for just US$1 so the fund could shed its future obligations on the property.

Overall, CPPIB grew to $632 billion in assets from $570 billion a year earlier.

“The CPP Fund’s growth this year continued the trend of reaching heights several years ahead of initial actuarial projections,” chief executive John Graham said in a statement Wednesday. “Solid performance by all of the investment departments and key corporate functions helps demonstrate how our strategy is on track.”

The fund’s holdings of public stocks and private equity climbed 13.8 per cent and 10.4 per cent, respectively, while its credit portfolio gained 10.8 per cent.

The Toronto-based