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Canada Pension Says Loss in China’s Stock Market Muted Returns

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Canada Pension Plan Investment Board said the selloff in stock markets, particularly in China, muted its annual returns.

The fund’s emerging-market holdings posted a loss “predominately driven by investments in China where public equity markets were negatively impacted by unanticipated regulatory reforms and a resurgence of COVID-19 cases,” according to a statement Thursday.

Turmoil in global markets during the last quarter exacerbated the pressure.

“The volatility affecting public equities during the final quarter, at levels not seen since the outset of the pandemic, muted returns achieved through the first nine months of the fiscal year,” the firm said. Investments in public equities returned 1.3% in the fiscal year ended March 31.

CPPIB earned 6.8% in fiscal 2022, pushing net assets to C$539 billion ($420.4 billion).

China’s stock market took a hit last year amid a government clamp down on technology firms, tightening regulations on real estate sector and a resurgence of Covid-19 cases. But since the beginning of 2022, global equities have been battered as well, by inflation, stricter monetary policy and the war in Ukraine. Shanghai’s stock exchange plunged more than 15% this year, while the S&P 500 has dropped 17.7% and Canada’s benchmark stock index is down 5.3%.

The decline in bond prices — the fastest drop in more than 40 years — also hurt returns, the fund said. CPPIB’s calendar-year return in 2021 was 13.8%.

CPPIB’s private equity investments returned 18.6%, driven by improved portfolio company earnings and outlooks in the information technology, financial and health care sectors in the U.S. and in Europe.

The pension plan continued to go deeper into private deals with acquisitions including cybersecurity company McAfee and Chinese mattress company AI Dream. CPPIB has teamed up with homebuilder Lennar Corp. to construct apartment buildings in the US.