Thank you, and good afternoon, Mr. Chair and members of the committee.
Thank you for having me here today to discuss and answer your questions.
It is an honour to appear on behalf of the Canada Pension Plan Investment Board, or CPPIB. How we are helping ensure that the CPP remains sustainable for future generations of Canadians is an important issue to this committee.
With me is Michel Leduc, Senior Managing Director and Global Head of Public Affairs and Communications for the Canada Pension Plan Investment Board.
We welcome the opportunity to discuss CPPIB and how we are investing the funds that have been entrusted to us.
We're strong believers in the value of transparency and open dialogue as one element of public accountability, especially through Parliament. I know your schedule is quite busy, so I'm not certain whether you've had a chance to read our submission and annual report, but regardless, I look forward to the committee's questions. I'll keep my opening remarks brief with that in mind.
I'll start by sharing a few observations on the global investment climate and trends that are affecting how we operate. I'll then touch on our recent financial performance and some strategic considerations for the years ahead, including preparations to receive, invest, and manage additional CPP.
Beginning with the investment climate, competition for investments continues to be strong. There is a glut of capital with, in essence, more money chasing fewer opportunities. There are signs of this across various asset classes. The lengthy bull market in stocks, growing demand for private assets, low yields on income-oriented investments, and high valuations on infrastructure are some examples.
In this type of environment, CPPIB's advantages are even more important. These include our exceptionally long investment horizon, our size, the certainty or predictability of our assets, our people, our expert partners, our unique approach to managing our portfolio, and increasingly, our corporate brand and reputation in the world's most hotly contested investment markets.
It's equally important that we remain patient and disciplined. We must continue to be highly selective about what investments we will make. The businesses we buy need to be able to preserve their value through cycles and achieve growth in the longer term.
The businesses we are buying should also be able to withstand or benefit from disruption, but this does not mean rushing to invest in the latest innovations; rather, it means thoughtfully studying how disruptors might affect the assets we like today in the decades to come. For example, what will autonomous vehicles mean for toll roads that we own, or for parking lots? These are the types of questions we continue to examine.
When we're considering trends like the heightened competition for assets and new disruptive forces, we look well beyond the immediate horizon. We're not trying to beat the market each and every year; we're looking to add value over decades. Our strategy aims to deliver steady, absolute, long-term returns over time through significant upswings and corrections.
I continually remind our stakeholders that we fully expect that one year in 10, the fund will drop by at least 12.5%. This is planned for. We design our strategy and actions to deliver strong performance measured over multiple generations of contributors and beneficiaries.
Amidst this backdrop, our return for fiscal 2018 was 11.6%, after all of our expenses. This was driven by strong public equity markets through the first nine months of the fiscal year, and when market volatility picked up during the fourth quarter of our year, the diversification of the portfolio provided resilience.
Investment income was $36.7 billion after all of our costs, and when combined with net inflows from CPP contributions of $2.7 billion, this brought the CPP fund to $356.1 billion as of March 31. When I last appeared before you about 18 months ago, the fund stood at about $300 billion. The 10-year return on the investment portfolio is 8% and the five-year is 12.1%. After inflation, these figures were at 6.2% and 10.4% respectively, well above the office of the chief actuary's assumption of an average 3.9% return to keep the fund sustainable over the 75-year projection period in their report.
Before concluding, I'll briefly touch on a few operational and strategic considerations for the years ahead.
As you know, in January 2019 CPPIB will receive and invest its first cash flows from the CPP enhancement that the federal and provincial governments have collectively put in place. Our preparations to manage additional CPP contributions are well under way and firmly on track. Our teams are diligently working to receive these new funds. We will structure the fund going forward in a way that will respect the funding differences between the base and additional CPP, while also ensuring that we make full and efficient use of our existing platform and global investment capabilities.
You will have gathered from our remarks that given our investment horizon, we are continually looking ahead into the future. As we do this and assess the various trends that I've discussed, we know that we can't rest on our laurels. The asset management industry is changing, and we must continually adapt. Our investing strategy will become more agile so we can seize opportunities and continue to be resilient as we face a number of forces whose precise outcomes remain uncertain, whether it's global growth trajectories, technological disruption, geopolitical forces, or climate change.
To position our international competitiveness, we will invest responsibly in new technology and data capabilities. This will augment our investment talent and skills, and we'll focus on improving operational efficiencies and increasing collaboration and knowledge-sharing across our diverse investment teams and corporate functions.
Our culture will be even more innovative and ambitious, while firmly rooted in our compelling public purpose.
That concludes my formal remarks, and on behalf of my colleagues, we thank the Standing Committee on Finance again for inviting us here today. I look forward to our discussion and I'm pleased to answer any questions you may have.