The chief executive of Canada’s biggest pension fund says he welcomes a conversation about how to make the country a more appealing destination for major capital investments, amid mounting pressure for the fund and its peers to invest more at home.

The Canada Pension Plan Investment Board appears to have weathered the latest period of intense market volatility, reporting an eight per cent return on investments for the year ended March 31, up from just 1.3 per cent a year earlier, as signs of stability in interest rates and inflation re-emerged. 

The fund, which manages assets on behalf of about 22 million Canadian contributors and pensioners, added $46.4 billion in investment income and $15.9 billion in contributions from members, bringing its portfolio to $632.3 billion in total assets, up from $570 billion in 2023. 

But behind the strong financial performance, Canada’s largest pension fund is managing considerable uncertainty, in the markets and politically, both globally and at home. “We really tried to build a portfolio that is resilient across a broad range of macroeconomic conditions,” CPP CEO John Graham said in an interview with The Logic. In a trying year, he said CPP’s results show “the portfolio performed as designed.” 

Pressure to invest more in Canada: Canadian assets made up 12 per cent of CPP Investments’ portfolio in 2024 (down from 16 per cent in 2020). A vocal faction of Canadian business leaders insist the fund manager ought to contribute more to domestic firms in a bid to stimulate the country’s sluggish productivity. Finance Minister Chrystia Freeland has enlisted former Bank of Canada governor Stephen Poloz to lead a working group to explore “how to catalyze greater domestic investment opportunities for Canadian pension funds.” 

CPP Investments noted, however, that Canadian assets are overrepresented in its portfolio, given the country’s size relative to other global markets. “Canada makes up just 3 per cent of global GDP,” the report reads. “We invest four times more than Canada’s global economic weight because we recognize the excellent investment opportunities in our home market.” 

Graham emphasized that the fund’s sole mandate is to maximize returns for pensioners, but said the Poloz initiative is a good one. “Where the discussion is now, on what are the potential investments that would be attractive to capital, and what’s the regulatory and the general investing landscape that would incent more capital, I think that’s positive,” he said.

Global shifts: Investments in China have weighed on the pension fund’s Asia Pacific portfolio, which returned just 0.1 per cent in 2024, compared to 4.6 per cent for the period since 2020. It cited challenges in China’s real estate market and broad economic impacts of the country’s zero-COVID policies. The fund’s exposure to Asia Pacific has declined from 28 per cent to 21 per cent over that period, with investments in the U.S., and to a lesser extent Europe and Latin America, making up the difference. 

While Graham said the fund’s appetite for China has changed, CPP Investments isn’t likely to pull out of the market altogether. “It’s important that we have exposure [to] and try to understand the world’s second-largest economy,” he said.  

Changing the benchmark: Despite its improved returns, the pension fund still underperformed its reference portfolio—a passive benchmark made up of 85 per cent global stocks and 15 per cent Canadian government bonds, against which it compares its portfolio performance. The reference booked a 19.9 per cent return in 2024, more than double that of CPP Investments. It credited the U.S. stock-market rally for the high benchmark returns. 

“The public markets have become very concentrated, become very U.S.-centric and become very tech-centric,” said Graham, which doesn’t make it an accurate benchmark of what a passive alternative portfolio would look like. 

The fund plans to tinker with how it measures its benchmark, starting this year, and create more transparency around the individual benchmarks each asset class uses as a reference. 

The AI effect: CPP Investments generated a 13.8 per cent return in its public equities portfolio in fiscal 2024. It attributed much of the gains to U.S. markets hitting record highs, driven by “select companies” in the tech sector that have benefited from artificial intelligence. 

Graham said the fund is engaging with portfolio companies on how AI will impact their business. But he’s also exploring direct investments in the space. “An area that we think is really interesting is digital infrastructure,” he said, including the data centres and energy required to support AI. 

What silver tsunami? Canada’s aging population is expected to strain the country’s pension system, with fewer workers soon responsible for supporting an outsized number of retirees. Canada’s chief actuary concluded in 2021 that CPP is financially sustainable for at least the next 75 years, with assets projected to reach $3.6 trillion by 2050. While pensioners may have security for a while yet, Graham said ensuring that continues is what drives him. “To declare success now is a little premature.”