John Graham, chief executive at the Canada Pension Plan Investment Board, speaks at the Canadian Chamber of Commerce's annual general meeting in Ottawa in a 2022 file photo.Sean Kilpatrick/The Canadian Press
Canada Pension Plan Investment Board earned a 7.8-per-cent return in its latest fiscal year as income from stocks as well as energy and infrastructure assets carried the fund through a period of upheaval and exuberance.
CPPIB’s 2026 fiscal year, which ended March 31, was bookended by the “Liberation Day” tariffs the United States imposed last April and the war in Iran it started early this year.
It was also a year when a small concentration of technology stocks surged to valuations that chief executive officer John Graham called “astronomical,” riding a wave of optimism about artificial intelligence and its potential.
That made the year challenging for CPPIB, which hangs its strategy on holding a diverse collection of investments to protect long-term returns for Canadian pensioners through cycles in markets.
The fund’s performance was dragged down by losses on foreign currency, and fell far short of its benchmark of 13.2 per cent for the year.
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“The market is rewarding concentration,” Mr. Graham said in an interview.
For the past three years, stock indexes with huge exposure to big tech companies have been riding high, and CPPIB has struggled to keep up. But he is confident that sticking to a diverse portfolio will pay off over time.
“We just don’t believe now is the right time to chase the market,” he said, referring to investment strategies that are more heavily exposed to the major technology stocks driving most of the gains in stock markets.
Over five years, the fund has an average annual return of 6.6 per cent, and its 10-year average is 8.8 per cent, both of which are ahead of the plan’s benchmarks.
Total assets increased to $793.3-billion, from $714.4-billion a year earlier. The increase included nearly $57-billion of investment income and $22-billion of net transfers from the Canada Pension Plan.
CPPIB manages and invests the Canada Pension Plan’s funds on behalf of more than 22 million plan members and beneficiaries.
Ottawa has said it will cut base contribution rates to the plan, which are shared by employees and employers, to 9.5 per cent from 9.9 per cent of pensionable earnings, effective Jan. 1, 2027. That will reduce total contributions by about $3-billion per year. Mr. Graham said the fund has strong liquidity and he doesn’t anticipate any impact on its investing strategy.
CPPIB’s publicly traded stock portfolio gained 17.5 per cent in the fiscal year. But bonds struggled, especially its portfolio of government bonds, which lost 0.1 per cent.
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Turmoil in energy markets early this year boosted returns from energy and infrastructure assets, with CPPIB’s sustainable energies portfolio gaining 23.2 per cent.
Mr. Graham said there is strong demand for more energy, from oil and gas as well as renewable sources. “We don’t think we need to choose … because we need all of it,” he said.
In Canada, there are “great opportunities” in oil and gas, he said, and the country has a chance to use its engineering know-how to quickly launch new projects.
Infrastructure investments gained 11.2 per cent, with toll roads, ports and rail investments performing well.
Data centre investments helped prop up the real estate portfolio, which earned 3.7 per cent, as office and retail assets struggled.
CPPIB made billions of dollars of new investments in new data centre development and partnerships during the fiscal year, including a $225-million loan to help build an AI-focused facility in Cambridge, Ont. But the fund is avoiding construction of new data centres that don’t yet have customers under contract, and eyeing cloud facilities in Asia and Europe that aren’t as sharply exposed to the AI race.
“The devil’s in the details and we shouldn’t kind of paint data centres with one brush,” Mr. Graham said.
CPPIB’s private-equity portfolio gained 2.9 per cent, suffering in part from a dip in valuations for software companies, which are facing potential disruption from new AI tools.
Mr. Graham said the software companies in CPPIB’s portfolio are “actually performing well” at an operating level. And after a major market selloff, some software stocks have started to rebound of late.
But there is still “a live debate” about what the ultimate value of those companies will be, he said.