August 11, 2017 / 12:38 PM / 3 years ago

UPDATE 2-Strong loonie weakens Canada Pension Plan's returns

* CPPIB achieves 1.9 percent return in latest quarter

* CPPIB’s net assets rise to C$326.5 billion

* Caisse achieves 5 percent return in first half (Adds comment from CPPIB CEO, Caisse results)

By Matt Scuffham

TORONTO, Aug 11 (Reuters) - The Canada Pension Plan Investment Board, the nation’s biggest public pension plan, said it delivered gross investment returns of 1.9 percent in the latest quarter, with the strong Canadian dollar hurting its performance.

The CPPIB, which manages Canada’s national pension fund and invests on behalf of 20 million Canadians, said it ended the first quarter on June 30 with net assets of C$326.5 billion ($257 billion), up from C$316.7 billion on March 31.

The fund has diversified internationally, becoming one of the world’s biggest investors in infrastructure and real estate. It is also a major global investor in equities and bonds, and derives the majority of its earnings from overseas.

The strength of the Canadian dollar, which hit a two-year high in July, means that overseas earnings are not worth as much when they are converted back to the fund’s domestic currency.

“The strengthening Canadian dollar against most major currencies applied downward pressure, a trend that accelerated in the first half of the current quarter,” said Chief Executive Mark Machin.

Machin said global equity markets produced a significant uplift during the last quarter, when gains from the fund’s fixed income investments also improved.

“I think, around the world generally, the underlying economic trend is quite strong, and companies are doing quite well on the back of that,” Machin said in an interview.

Canada’s second-largest public pension plan, the Caisse de depot et placement du Quebec, said on Friday that it achieved an average return of 5 percent on its investments in the first half of 2017.

The Caisse, which manages pension plans in the mostly French-speaking province of Quebec, said its net assets grew to C$286.5 billion from C$270.7 billion at the end of 2016.

“In the first half of 2017, global equity markets continued producing good returns,” said Chief Executive Michael Sabia, “while both volatility levels and interest rates remained low.”

$1 = 1.2717 Canadian dollars Reporting by Matt Scuffham; Editing by Chizu Nomiyama and Lisa Von Ahn

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