Good evening, Mr. Chair and members of the committee.
I'd like to thank the committee for its invitation.
I'm pleased to have this opportunity to answer your questions about our investment strategy.
CPP Investments is the professional investment management organization that invests CPP funds not currently needed to pay benefits. Our purpose is to help provide a foundation upon which more than 21 million contributors and beneficiaries can build lifetime financial security.
Our enabling legislation has very clear objectives—to achieve a maximum rate of return without taking any excessive risk, while also considering the factors affecting the overall funding of the Canada pension plan. A professional board of directors oversees the management of the enterprise. Assets are segregated from government funds and managed with the singular goal of repaying our contributors with their earned benefits today and for many decades to come.
The fund is composed of only two things: payroll contributions and net investment income. Assets of the fund now exceed $500 billion. Of that total, over $370 billion is from our investment operations.
Canada stands out as one of the very few countries worldwide with a solvent national retirement fund. Our organization was set up to expose the fund to capital markets to achieve financial returns. Optimal diversification and a long-term focus on growth have achieved a level of financial performance few institutional investors worldwide have matched. Recent third party benchmarkers ranked CPP Investments number one in performance among global peers.
Diversification allows us to capture global growth and withstand periods of market uncertainty. It is a powerful way to enhance returns and also to prevent concentration risk. When liabilities extend so far into the future—to pension obligations beyond 75 years—growth and resilience from diversification are predicated on exposure to emerging markets. These markets are expected to account for more than half the world's annual GDP within the next 10 years.
Exposing the fund to the Chinese market gives us access to one of the world's largest and fastest-growing economies in such sectors as consumer discretionary spending, logistics and real estate. In addition to growth from this demographic opportunity, China often moves in ways uncorrelated to developed markets, thus adding balance to our portfolio, yet we do absolutely understand that there are very significant risks, particularly in the face of important social issues and evolving geopolitical risks.
We aim to always conduct ourselves as principled and prudent investors with a view to acting in the best interests of contributors and beneficiaries. As we pursue global opportunities, we seek to avoid investments in companies involved in wrongdoing, especially violations of human rights.
We do this in different ways. We incorporate human rights into our investment decision-making processes for all major transactions. Second, we do strong diligence, including assessing political, legal and regulatory risks. Third, we have tools and systems to monitor and assess both passive and active holdings that do not meet our expectations on such issues as human rights.
As a long-term investor, we actively engage with and influence companies with human rights as a long-standing focus area. If that fails, we will exit or avoid making an investment in the first place.
All these processes apply to our investments in China. We recognize that any investment in China needs to be handled with care, sophistication and an acute understanding of the current political and geopolitical environment.
I'd like to thank the committee for inviting me.
I'd be happy to answer any questions you may have.
Thank you.