John Graham, President and CEO of CPP Investments, emphasizes the importance of a long-term perspective in managing the Canada Pension Plan (CPP) Fund. Graham argues that while chasing returns of heavily concentrated market indices may seem appealing in the short term, it is not a sustainable strategy for a national pension fund. He highlights that the CPP was created to ensure Canadians' financial security in retirement, and its long-term sustainability is paramount. Graham notes that the CPP has been one of the top-performing national pension funds in the world, with over $800 billion in assets, thanks to reforms made in 1997 that increased contribution rates and established CPP Investments. These reforms helped the CPP avoid insolvency and secure its future for generations to come.
Graham stresses the critical responsibility of CPP Investments to manage the CPP Fund prudently and deliver on Canadians' expectations. He explains that the mandate is to maximize returns without undue risk of loss, taking into account the factors affecting the CPP's funding. Graham acknowledges the recent success of heavily concentrated market indices but argues that the CPP must remain resilient across various futures, not just the recent one. He emphasizes the importance of building a well-diversified portfolio to ensure the CPP's long-term sustainability and the preservation of the pension promise.
Graham highlights the asymmetry of risk in managing a national pension fund, where long-term impairment could affect millions of Canadians. He notes that the CPP's financial health is the most important test, and the fund has been independently assessed to be financially sustainable for at least the next 75 years. Graham also acknowledges the use of benchmarks to measure performance but warns against treating them as the sole objective, as they can become counterproductive when focused on short-term gains. He concludes by emphasizing the importance of maintaining a long-term perspective and emulating the boldness shown by Canadians when building and sustaining the CPP.
