Mandate: As distinct from some other public pension funds, our mandate has a single investment focus. As enshrined in legislation, our mandate is to help pay future CPP benefits on behalf of the 16 million contributors and beneficiaries. Our investment mission and fiduciary duty are, in part, to maximize returns without undue risk of loss. Our investment organization is accountable to an independent board of directors. The CPP Investment Board reports to Parliament and to the federal and provincial finance ministers, who serve as stewards of the CPP. We are, however, managed independently of the CPP and at arm’s length from governments.

Time horizon: Our long-term investment time horizon and no requirement to immediately help pay benefits create compeititve advantages for the CPP fund. The Chief Actuary has projected that annual CPP contributions will cover benefits paid until 2022. At that time, the plan is expected to begin using a relatively small portion of annual investment income to help pay benefits. This relative certainty of ongoing positive inflows allows us to invest a higher proportion of the portfolio in areas such as real estate and infrastructure that require patient capital and which offer inflation-sensitive income streams that are a good match for the CPP’s inflation-indexed liabilities. We can also invest a higher proportion of the fund in areas such as private equity and venture capital that typically require several years to generate returns. Also, substantial annual inflows allow us to make investments with new cash rather than having to sell existing investments to fund new opportunities.

Scale: According to the Chief Actuary of Canada, the CPP fund is projected to grow to $246 billion within the next decade, placing it among the world’s largest institutional investors. The size of the fund entails both advantages and constraints. One of the advantages is that we can commit sizable amounts to individual investment opportunities. We also have the ability to seek strategic partnerships with the world’s leading investment management organizations. Moreover, we can cost-effectively commit resources to develop the internal capabilities and leading edge decision making and risk-management tools that are required to manage a fund of this size and complexity over a long period. As for constraints, the size of the fund generally makes it impractical for us to pursue some investment opportunities that might otherwise be attractive but lack sufficient scale to make an appreciable contribution to our overall returns. As well, our significant investments in public markets can have the potential to affect markets through our trading activity. And, while sizeable monthly inflows from contributions provide new money for investment, they also entail deployment costs.

Focus on risk/return management: Our activities are focused on achieving, at a minimum, the projected return required to help sustain the CPP. Based on reasonable demographic and economic assumptions, the Chief Actuary has projected that the CPP’s current benefits and contribution rate are sustainable for at least the next 75 years, the length of the Chief Actuary’s study period. The sustainability of the CPP depends on various economic and demographic factors and assumptions. The assumptions are subject to review every three years when the Chief Actuary updates the plan’s projection for review by the federal and provincial finance ministers, who serve as stewards of the CPP.