Nation's Biggest Pension Fund Records a 10.2% Annual Gain on Real Estate

Nation’s Biggest Pension Fund Records a 10.2% Annual Gain on Real Estate

Canada’s largest pension plan said its real estate holdings climbed to $49 billion at the end of its fiscal year, 9% of the total $539 billion held by the Canada Pension Plan Investment Board.

The pension fund said the one-year return for real estate for the period ended March 31 was 10.2%, up from a 4.5% negative return a year earlier. The overall fund returned 6.8% in the fiscal year.

“Real estate investments had modest value-add contributions as they suffered from the impact of the pandemic lockdown measures on the retail and office sectors in fiscal 2022 and 2021,” the pension fund said in its annual report.

Overall, CPPIB saw a $42 billion increase in net assets made up of $34 billion in net income and $8 billion in net transfers from the Canada Pension Plan.

The five-year annualized return for the total fund was 10% but real estate lagged at 5%.

“We believe broad asset class labels such as ‘equities’ ‘real estate’ do not sufficiently capture the underlying factors that influence the risks and returns of investments. Accordingly, we analyze the fundamental and more independent return-risk factors that underlie each asset class and strategy,” the pension fund said in its annual report. “Armed with this understanding, we can more accurately achieve our preferred mix of global exposures designed to maximize returns at our targeted market risk level.”

The pension said real estate’s 5% return was affected by downward pressure on returns driven by lowered tenant demand in the office and retail sectors as pandemic-related isolation measures between fiscal 2020 and the first half of fiscal 2022 were implemented.

“However, real estate performance was positively impacted by increased demand for industrial assets, particularly in the Asia Pacific region,” said CPPIB.

Source CoStar. Click here to read a full story

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