Recently I read about our Canada Pension Plan (CPP) reaching $200-billion mark in assets for the first time. As one of the 10-largest retirement funds in the world, it’s a financial behemoth. Here’s how our money is invested by region:
Here it is by sector:
Here are my quick takeaways from how CPP invests and what we can easily copy in our portfolios:
- Canadian and North American assets make up more than half of the portfolio but this means other investments extend far beyond those borders. The lesson: diversify your investments from around the world.
- Real estate does not comprise a large percentage of the portfolio. The lesson: investments go beyond your primary home.
- About half of the holdings are in equities. The lesson: balance your portfolio with fixed income and other asset classes.
The boring and simple CPP investing approach has allowed this massive fund to reach record-highs and earn an annual rate of return of about 5% over the last ten years after inflation is factored in. Most investors would be more than pleased with these results over the same investment period.
Any lessons learned here for your portfolio?
Awesome article, great break down of the CPP. Diversification rules. Would be interesting to compare against a similar breakdown of the other 9 super large funds.
keep up the great work.
Absolutely diversification rules! Thanks for the comment.
It may be boring, but it looks like a solid and diverse portfolio. We’re working on balancing our portfolio out a little more and driving it away from such a high percentage of real estate – ie our primary home.
I think boring and steady will win the race, my portfolio is banking on it 🙂
That was point exactly, a home is great (real estate) but it shouldn’t be most of your portfolio value. Just my opinion.
Is there a CPP Index Fund? They should start one up, and allow folks to buy into it, nice side business.
Maybe that should be the name of a balanced mutual fund or ETF?
Interesting that real estate only makes up around 10% of the portfolio. I’d say for most people real estate makes up 40% or more of their net assets. As you said it looks like diversification is important and this portfolio is an example of how a diversified portfolio can still have respectable returns
Hey Dan,
Yes, which I think is a lesson for all of us. I hope to have my house only as a small percentage of my assets; definitely not worth the majority. I have to live somewhere after all. This would be better diversification don’t you think?