Eighteen years and $46-billion later, the CPP admits it could have earned more just by buying index funds

[CdnFox]

Opinion: Eighteen years and $46-billion later, the CPP admits it could have earned more just by buying index funds - The Globe and Mail (archive.ph)

What does that mean? It means that if the fund’s managers had stopped trying to pick stocks and just bought index-linked ETFs like the rest of us – a strategy, known as passive management, that could be executed by your average high-school student – they would have earned more than twice as much on their investments last year as they in fact did.

 

That’s not the news, however. The news is not that the fund trailed its benchmark in its most recent fiscal year. The news is that it is now trailing it, on average, over the entire 18-year period since the fund, until then a small, low-cost outfit that mostly just bought the indexes, went all in on active management.

 

The fund acknowledges as much, though not until page 39 of the report, where it confesses to having earned “negative 0.1% annualized or negative $42.7-billion since inception of active management in 2006,” relative to the reference portfolio. Indeed: while the fund has earned 7.7 per cent annually since then, the reference portfolio has earned 7.8 per cent. (All figures here are based on CPPIB annual reports, 1999 to 2024.)

 

Edited May 26, 2024 by CdnFox

[CdnFox]

So the short version is if they had just set it on auto pilot it would have done better than all the expensive staff we had running it managed to pull off. 

Gov't is the reason we can never have anything nice 

[herbie]

Oh IF they'd invested in Bitcoin it would've made.....
therefore they really lost $xxxx

Let's blame them like it's a fail for not having a crystal ball

 

[CdnFox]

2 hours ago, herbie said:

Oh IF they'd invested in Bitcoin it would've made.....
therefore they really lost $xxxx

What have we said about not posting when you're drinking?

Quote

Let's blame them like it's a fail for not having a crystal ball

They literally got hired claiming they had a crystal ball. 

That was the point. They argued that highly trained and experienced people could significantly outperform a simple algorithm and get a higher result. That's why we paid the money for their salaries. 

Not only did they fail to do better - they did worse. 

They might have at least beat a magic 8 ball if not a crystal one  

[Moonbox]

A few things to consider here:

If CPP is only behind by 0.1% annually over 18 years after a (relatively) awful year last year, that means that it was ahead for the 17 years prior.  Who was singing its praises prior to 2023?  

2023/2024 could very well be the top of the current cycle.  Measuring a diversified, managed portfolio against an overheated index at the top of the cycle will yield predictable results.  

Andrew Coyne is right that most managed funds don't keep up with the index after fees, but in this case he's offering a pretty poor take.