Though the Canada Pension Plan Investment Board (CPP Investments) ended its latest quarter in the red as rising inflation, interest-rate hikes and the war in Ukraine took a toll on markets, it still managed to wrap its fiscal year with a 6.8 per cent net return, just beating its reference portfolio forecast. The country’s largest pension fund manager—it invests pension contributions on behalf of some 20 million Canadians—manages assets now totaling $539 billion, down from more than $550 billion last quarter but still over eight per cent more than at the end of its last fiscal year.

In an interview with The Logic Thursday, CEO John Graham said he’s cautiously optimistic in the face of a shaky market and offered assurances that pensioners’ retirements are in good hands. Here are the highlights from that conversation, and from the fund’s results:

It could have been worse: CPP Investments had amassed a 9.7 per cent net return through the first three quarters of fiscal 2022. But its performance took a sharp downturn at the outset of the war in Ukraine coupled with worsening inflation, supply-chain disruptions and the ongoing pandemic. The volatility “resulted in significant declines in global equities and bond prices,” CPP Investments said in a presentation on its results. It finished the quarter with 2.9 per cent in losses and an $11-billion dip in total assets.

Compared to the broader market, CPP Investments’ portfolio fared relatively well. The S&P Global LargeMidCap Index shed 6.5 per cent for the same period, while the FTSE Canada Universe Bond Index dropped 7.2 per cent. The median Canadian pension plan lost 6.4 per cent for the same period, according to financial service provider Northern Trust. 

Long-term thinking: CPP Investments still posted a 10.8 per cent average return over a 10-year period, the same rate as last fiscal. Its five-year net return dropped by one percentage point to 10 per cent. After adjusting for inflation, real returns were 8.6 per cent over 10 years and seven per cent over five. “What really matters is that long-term performance,” Graham told The Logic. “We expect volatility and variability year over year.” 

But make it sustainable: The fund manager reported major swings across several asset classes from fiscal 2021 to 2022. Despite the volatility, Graham said CPP Investments is, generally speaking, staying the course when it comes to investment strategy. “There’s always a little bit of an organic component to the portfolio being built by the opportunities we find in the marketplace,” he said. One opportunity CPP is focused on now is real assets, specifically those related to sustainability and the energy transition. “The world will do whatever it can to transition to net-zero, and it’s going to require patience, scale [and] long-term capital, which is the type of capital that CPP Investments has.”

A tech buying opportunity: CPP Investments holds plenty of stock in public technology companies, and the losses in the sector are reflected in the fund manager’s equity portfolio results. That hasn’t turned Graham off of the space. “Some of these tech companies, they’re still good companies. They have cash flow, many of them are still growing,” he said. “It’s starting to look more like value plays and growth plays right now.”