Canada Allocation: CPP Investments maintains a significant overweight to Canada, continuing to seek attractive risk-adjusted opportunities despite domestic economic headwinds.
AI Infrastructure: The fund has active exposure across the AI ecosystem, notably in data centers through its infrastructure and real assets teams, and continues to evaluate global opportunities.
Semiconductors: A detailed case study on NVIDIA (NVDA) illustrates a multi-year thesis on GPUs powering AI, highlighting disciplined re-underwriting amid shifting market expectations.
Energy Sector: The team sees selective value in Energy, considering dynamics from the energy transition and rising AI-driven power demand, and will evaluate infrastructure like pipelines where economics are durable.
Electric Vehicles: CPP views the EV space across the full auto value chain—automakers, suppliers, and battery manufacturers—as a source of global opportunity.
Autonomous Vehicles: The fund is an early investor in Waymo, citing expanding city deployments and partnerships (e.g., with Uber) as evidence of advancing autonomy capabilities.
Valuation Discipline: While open to innovation-led growth, the fund applies strict bottom-up valuation and risk frameworks, noting caution where high expectations (e.g., in gold miners) raise hurdles.
Portfolio Construction: Strategy emphasizes risk targeting over static allocations, assembling bottom-up, market-neutral alpha across geographies, sectors, and time horizons.
Transcript
We are uh very very riskaware. I would not uh want to confuse uh the fact that we take what we do very very seriously. We are here for one reason and one reason alone and that is to uh provide retirement income for the 22 million Canadians uh who contribute to our beneficiaries to the Canada Pension Plan. Frank, thank you very much for joining us today. So, you are the global head of active equities at CPP Investments and CPP Investments is one of the largest pension funds in the world with over $780 billion in assets under management. And I think many Canadians are quite familiar with Canada pension plan, but they're not so familiar with CPP investments. So maybe you can just clarify for us how CPP investments helps Canadians achieve financial stability. >> The CPP that most Canadians uh may interact with more often is uh the part of the ecosystem if you will that collects their contributions and pays the beneficiaries. Uh in 1997 there was an act of parliament that created a crown corporation called the Canada Pension Plan Investment Board and that organization was set up specifically to manage the uh the monies within the CPP >> and if we look at total assets under management 780 billion approximately what's the breakdown between public equities private equities real estate fixed income >> we have approximately 45% in public equities another 25% in private equity about 15% in uh you know fixed income in credit and the remainder in our uh real assets which includes like infrastructure investments and real estate investments >> and what percent of the 780 billion would be allocated toward Canada >> uh about 12% which translates into you know just north of uh 100 billion I think it's about 115 billion >> and that's public private real estate fixed income You got it. Yeah. Across all of those asset classes. >> And Frank, you are the global head of active equities. What exactly does your job entail? >> I lead a group that is responsible for delivering alpha in the global public equity markets. The way we do that is through our proprietary fundamental research. Our goal is to try to find companies for which we have a differentiated or unique point of view and that have really interesting and attractive investment return potential. We make those investments and assemble those investments into a uh market neutral portfolio. >> And because you manage global money, many money managers will benchmark themselves to an index like the MSCI World Index where the US has a large waiting 70%, Canada relatively small at 3%. Maybe you can speak to that if you benchmark yourself to that index and also if you could speak to capital allocation. So as an active investor, we absolutely benchmark ourselves. That's key to understanding have we delivered, you know, have we outperformed um a passive index through active management. We have a number of different benchmarks depending on the asset class and the geography that we use throughout you know the different strategies. As far as CPP investments is concerned, uh MSCI World Index is not our benchmark for example. uh but if you take a step back I think that you know really what we're talking about here is is uh asset allocation. There are many investment managers that will target a specific asset allocation and those tend to be roughly static. So they'll say we're going to allocate you know 30% to the US or we're going to allocate uh 25% to a particular asset class. And for CPP investments it works a little differently. We target a risk level and what that allows us to do is be more flexible in the way we think about the asset allocation through by targeting through the risk level we can think about where are the most attractive riskreward opportunities where do we get the most attractive relative value and that allows us to think about where which sectors geographies or asset classes we want to be in. Now it's all within that risk envelope if you will. So we then measure our investment portfolio through the lens of a a um uh that that risk envelope and we have limits and so on and so forth on that but we try to manage to that level and maximize returns at that level giving ourselves that flexibility to think across as I said the different asset classes geographies sectors so there's two elements to it there is the the risk targeting and then a asset allocation that happens against that risk target and we think about remember this is a uh we this is a a multigenerational fund right so we are thinking about not the next year or the next five years but the next 25 years so we look at the performance of different asset classes different geographies um different sectors and really what we're trying to do is find what is the optimal mix that delivers us the maximum returns without undue risk of loss going back to what our our mandate is um and within that we will have allocations to the the different strategies, right? So that that'll that'll imply an allocation to for example private equity. Okay. When we when we think about how we then deliver that exposure, it's done through active management and that starts off with the security selection decision. What are the specific investments in companies that we are going to make and that happens bottom up. So you could think about the CIO thinks about what is that asset allocation given the risk levels that we're trying to achieve. What delivers a resilient and diversified portfolio against that risk level? That determines roughly speaking the ranges that we would want in the different asset classes. And then Ed, our CIO, will come to Frank and say, "Frank, I need you to deliver me alpha within the global public equity markets. and here is the capital that I need you to deploy. When I get that capital, my my question then becomes where do we think there are the most attractive opportunities globally in the public equity markets? And we start off with a very bottoms up kind of fundamental approach to thinking about those companies. We have roughly a kind of three to five year horizon. Our goal is to identify where we think we truly understand what is going to matter to that company and where we think we have a unique point of view, a differentiated insight that leads us to believe that there's a an attractive opportunity, a mispricing in that company. We organize ourselves around uh industries. We call them domains. We we kind of start off with the classic industry definitions, but tweak them uh to be a little bit more thoughtful in how they're constructed. And we build expertise within each of those domains. And the folks that are responsible for that are respon the folks that build that expertise are responsible for ultimately coming up with the ultimately executing the research and coming up with the ideas within that domain of the individual companies that we ultimately would invest in. So you see that it kind of ends up being this uh two-pronged approach. there is an asset allocation but not quite in the way that traditional money managers would do it where they are a little bit more static. It's more of a a risk targeting that then determines ranges for the different asset classes and then a bottoms up approach that really focuses on the security selection to deliver the alpha and the outperformance relative to uh a more passive benchmark. >> And maybe you can speak to country risk because we are living through some unusual times right now. There's a lot going on in the world. We still have war in the Ukraine, hostilities in the Middle East, we have the recent situation in Venezuela. How do all of these global factors or political events come into the decision-making process? >> Uncertainty and risk are not new to active investors, right? We are I mean the very nature of investing is decision-m under uncertainty. uh I think what has changed today is simply the uh the number of different forms of uncertainty that are present simultaneously and that is a challenge for sure as it relates to the security selection decision. I go back to what I said earlier. You know, we have a very disciplined approach. It starts with a deep understanding of the sector or domain that we're looking at and an understanding of what are going to be the fundamental fin or fundamental or financial drivers of that company over that 3 to 5 year horizon. That sounds simple. It's actually tougher than it sounds. Uh companies are dynamic and they operate in uh very competitive ecosystems. So it's a deep understanding just to get to the point where you kind of where you have the ability to say, "Hey, I I kind of get what the strategy is today. Where is that strategy going? What does that mean for what matters to the to the fundamentals?" Then the real work begins and that's where the fundamental research kicks in. all of what you described in terms of those um uh those risk factors, the the uncertainty that we're seeing in the world today, the geopolitical tensions, the uh the nature of of uh different economies and war in Ukraine, so on and so forth. These are all things that we would have to take into consideration, but not necessarily in the way that you might be thinking. We look at it and say, is this something that is fundamental to the company? Can we have a deep and differentiated point of view on it? And if the answer is no, then we don't invest. We look for other opportunities. And if we do believe that because of our platform, the access to information that we have that we can develop a unique perspective on some of those things, then we would incorporate it in the underlying uh assessment of the fundamentals of the business. >> Okay, let's bring it closer to home now and discuss the Canadian economy. It's been relatively weak. It's still growing but at a very modest rate. GDP per capita has been declining now for many quarters. Labor productivity has also been in a decline for quite some time. Unemployment continues to climb across the country. And then we still have all this uncertainty associated with trade negotiations between Canada and the US. And so when you look at the situation closer to home, how do you maneuver all of that when it comes to making investment decisions? Look, as I said before there, you know, Canada is uh an important uh an important market for us. We have 12% of the assets our assets in Canada and by any traditional measure of asset allocation that you would see from you know other uh global investment managers that is a significant overweight. So I think it speaks to you know what we believe is a strong market and we continue to it's our backyard. So this is exactly where we uh where we operate, where we want to play, where we look for investments. These types of risks that you mentioned are uh important for us to consider. We absolutely do. And we continue to look for attractive opportunities against those uh those risks where we think that we are appropriately compensated for those risks and avoiding places where either we don't think that that compensation is is enough or where we don't think we have a real deep insight or understanding where just the uncertainty is at a level that we can't uh we can't make an investment. >> And the Canadian economy has a very rich resource sector. Does CPP investments invest in the Canadian energy or mining sector? >> We do. Uh there's no we don't take an approach where there's some sectors that are on or off. We don't have u you know a top- down kind of uh view of, you know, this is good, this is bad, we're going to invest here, we're not going to invest there. As I said, you know, there's an asset allocation strategy and then each of the individual um investment teams look for opportunities within those asset classes. So we have invested there before and we will continue to invest across Canada, not just within those sectors but but certainly within the energy and mining space >> and many leaders within those sectors, the mining industry especially have been very critical of Canadian pension funds saying they don't invest enough in the mining industry versus somebody like of the Australian pension funds. What would be your response to that criticism? I I would say that our goal is not to invest in any individual sector. Our goal is not to support you know a sector here or anywhere. Our goal is to generate returns that pay pensioners. Our goal is to maximize returns without undue risk of loss. And so if we see opportunities, we will absolutely take them. >> I want to ask you about gold now. It's been a big outperformer in the last two years. It was up 25% in 2024, up 60% in 2025. There's many reasons for this, but one of the reasons has to do with central bank buying. Ever since 2022, central banks have taken their buying from 20% of annual production up to as high as 30%. And then, of course, we have the fiscal situation in the US with the federal debt level at $40 trillion, interest payments approaching a trillion dollars a year. Does CPP Investments have any investments in physical gold or gold miners? >> I don't believe we have any investments in physical gold. um from that asset allocation framework that I shared with you earlier that's not part of the you know asset class uh structure that we uh that we apply um but certainly within individual companies we would and have made investments in uh the mining space in general across all types of miners including precious metal uh right now within active equities we don't have any investments within uh the gold space or the you know with gold miners and coming back that's not a that's not a a Paul specifically on um that that space in general. It's a really just a reflection of what is it that we're seeing from a value a valuation perspective and where do we think that we have attractive opportunities? Where do we think we have differentiated insights? >> So because of the move we've seen in gold at or near $5,000 an ounce, the producers are trading at a very rich valuation. So therefore, it just doesn't meet your bottoms up approach to value investing. Yeah, when you start seeing I mean that it's been a pretty it's been a pretty terrific run and it means that the expectations going forward are even higher and what for us what we're looking at is the the company specific fundamentals and this kind of makes gold investing unique relative to the other sectors because there's a commodity price component that you can't ignore and that is very very important and that does drive the economics of the business and the fundamentals but it is driven by factors outside of the control of the company, their management, their strategy or the competitive dynamics in the in the markets that they operate in. So our go our approach needs to be dualpronged. We need to understand what are the dynamics in the gold market as well as what are the company specific um strategies uh that are are being deployed and whether or not we can develop a differentiated point of view. When you have the market run as strongly as it it has, it does create a higher hurdle for us to really get comfortable that we still see value there. >> Now, what about energy? Oil's trading around $65 $70 a barrel. Do you see value there? >> Energy is a really interesting space when you think about just the energy transition, the use, you know, given um the rise in AI, compute and data centers. So yes, overall I would say that there is uh we certainly see value and it is in pockets, different spots. It's um going back to what we said before that bottoms up approach you know hopefully leads us to the to uh identify those opportunities within those spaces that are the most attractive. >> And just with regard to energy under the previous Liberal government when Justin Trudeau was prime minister I think it's safe to say that government was anti- oil. Now under Mark Carney, it seems like they're they have a more positive stance toward energy and building out this this sector of the economy. Is this something CPP investments would invest in? Would you invest in pipelines or building out other aspects of the infrastructure? >> Look, we would evaluate any opportunity. Um, and what we need to be convinced of is that there's an actual, you know, economic case to be made and that and that there's durability to these assets. So if we were presented with an opportunity uh we would certainly be interested in evaluating it within the automoility domain is you know you think about um the as I said you know we structure these these clusters of companies into what we call domains and you start off roughly speaking with the definition of an industry and then you fundamentally change that right autom is our for you know simplicity sake is our auto domain but it includes more than just automakers. It's the entire value chain. That entire value chain will include things like um the energy, right? It'll include things like batteries, so on so forth. So from when we start to we think that there's some really interesting opportunities in the automoility domain and some of that comes from the battery producers. >> Frank, I want to ask you about artificial intelligence. Now, that's been one of the big drivers we've seen in the markets here in the last few years. Chat GPT was released in November of 2022. At that time, OpenAI was valued at $20 billion. Here we are a few years later, it's now valued at $500 billion based on the last raise. Still a private company, but CPP investments have any exposure to artificial intelligence andor the data centers that are required to build out this sector? We do uh we do have investments across the AI landscape including data centers. Uh data centers in particular is an area that we've spent uh more time researching primarily through our real assets group and uh a team within that group called infrastructure. Um these are investments that we've made uh not just in the US but globally and um that we we continue to we continue to evaluate the space. It's very very interesting uh very dynamic, very fluid. So moving quickly um but as I said you know using that the bottoms up approach in terms of our security selection but also the power of the platform the things that we can do uh across the globe with uh different investment partners is is pretty impressive. It is really a a world-class organization in in terms of the types of things we can do as well as the um uh types of opportunities that we get to be uh an investor in. So we've made a number of investments across that across the AI landscape. >> Now there's been a lot of concern associated with valuations and you spend you mentioned earlier you spend a lot of time looking at businesses from a bottomup point of view. Are you concerned at all about the valuations that we're seeing right now? It's a very interesting time right now where there is a a high degree of concentration in the S&P 500, you know, with the Mag 7. Um, but this is I I find this, you know, very similar to the conversation that we had about gold, right? And, you know, even more so the conversation we have about just risk and uncertainty on a on a global level. All of these things are just part of the um the calculus that goes into an investment decision. So it's about understanding what are the drivers, what are the underlying economics, can we get a differentiated point of view. Um we see pockets where there's still a tremendous amount of value. We were a big investor in Nvidia for many years. Uh our first investment I think started in 2018 on the back of a thesis that was predicated on uh GPUs and the usage within the AI ecosystem. uh we held that all the way through 2025. It was a tremendous investment. Uh and look for many points in that time period. Uh we needed to rethink and reunderwite. And in hindsight, it's easy to say, "Oh, that was successful." But at any given point in time, we needed to think about what was being priced in in the market, what was our unique point of view, and where we getting the most interesting uh riskreward potential from that relative to other investments. It's the same today. >> And many people have compared what's happening right now with AI valuations to the tech bubble of the early 2000s. Do you share any of those concerns? >> I don't really think about it that way. I understand why why people would make that analogy. Uh anytime there is uh new technology there's a degree of you know almost like euphoria that comes with it. So I can appreciate that that there that there is a temptation to do that. But each of these situations present so many unique features that it's difficult for me to look at one and say this is this is a carbon copy of what this other thing is. Um, you know, I just shared with you kind of the Nvidia story. There were points in time where where there was a lot of skepticism around the underlying demand for Nvidia's GPUs and at that time it was seen as being euphoric and yet we have had uh tremendous resilience in in that that underlying demand. So I think you have to approach each situation understanding the unique circumstances that underpin it and not necessarily paint with broad brushes. Ah AI is overvalued or AI looks like the tech bubble. I think you need to really pick and choose the spots and understand what is it that is driving this particular company. How sustainable is that and then from there draw the conclusions. >> EVs have become very popular here in the last five or six years. Do you have any investments associated with EVs? >> We do. Uh it's an interesting uh sector for us. We tend to think about kind of the auto sector across that entire value chain from the automakers to the suppliers to you know battery manufacturers. Um and there's a we think that there's some very interesting opportunities across that space globally. I was recently in Austin, Texas, and when I was there, I took out one of these autonomous driving vehicles, which is operated by Whimo in partnership with Uber, and I was blown away by its capabilities. Do you have any investments in these autonomous driving vehicles? >> We do. We're actually investor in Whimo. Uh Whimo is an Alphabet company. We were a very early investor. Uh I'm glad that you had a a good experience. It is a It is a really interesting and tremendous company. It's been a very um it's been a very successful investment for us. They are expanding through different cities. Now, uh what you experienced in Austin, Texas was a partnership with Uber, but in other cities across the US, they are triing different types of partnerships to see, you know, what what kind of makes the most sense for their their business strategy. Uh but it is a pretty unique experience getting into one of these vehicles and uh just seeing the capabilities that are are available today um and how uh just how precise it is in driving. >> So I have to admit I'm very surprised that CPP Investments has investment or had an investment in Nvidia. You also have one in Whimo. Uh I guess it surprises me because I thought you would be a lot more conservative in your approach, but it sounds like you're very open-minded toward new investments. Absolutely. I mean, look, there's a couple things I would say. One is um and it goes back to what I said earlier. It we we have a platform that allows us to really try to identify where we think the most attractive investment opportunities are globally and across different asset classes. uh we have uh tremendous people doing this all over the world and we're not constrained to any particular notion of investment style or even horizon. We can think about things in a shorter term and a longer term. So it's I appreciate why that might be surprising to uh to somebody who is looking at a pension plan and thinks about uh a pension plan as being you know conservative maybe even sleepy and what I would say is we are uh very very riskaware. I would not uh want to confuse uh the fact that we take what we do very very seriously. We are here for one reason and one reason alone and that is to uh provide retirement income for the 22 million Canadians uh who contribute to our beneficiaries to the Canada Pension Plan extremely seriously and the risks that we take we are taking with a mindset towards delivering returns. But with that said we are a a worldclass and sophisticated platform. The fact that we've made investments in some of the world's most um in some of the world's most interesting some cases largest companies is not by accident. It's by, you know, 20 years of building out capabilities to um to uh develop strategies and teams that can prosecute and execute investment ideas across strategies across the globe across uh asset classes. >> I want to ask you about one of your competitors now and that's Nores which is the sovereign wealth fund for the country of Norway. Norway is a very small country, only five million people, and it's not really a pension plan per se. It receives its revenues from the oil and gas industry, but it will invest those assets or those revenues on the behalf of the people of Norway. My sense is they're a lot more aggressive with their money, and they just released their 2025 performance numbers. They were up 15% on the year, and which I was really surprised to see. Like, that's 15% is a big number. Maybe you can just speak to that. And when I look at Nortis, is it comparing apples to apples? When I compare it to CPP investments, >> it's really So, short answer is no. It's not really comparing apples to apples. Um, and that's not just with Norges. I think it's with any pension plan or sovereign wealth fund. And you kind of touched on this, Jimmy, where uh just the aggressive nature. And it doesn't even necessarily mean that it has to be aggressive. It's it's an asset allocation strategy that um that is appropriate for the objective function that these different uh you know sovereign wealth funds or pension plans are trying to achieve. But what that means is that the that asset allocation the way they think about that objective function is going to differ and then comparisons become tough. So just to give you an example of why I say that Noris has approximately 70% of their fund within public equities. So if we think about this if you had a portfolio that was 70% equities and 30% fixed income and I had a portfolio that was the inverse of that. If I had 30% equities and 70% fixed income, we would expect that there would be a different return profile for those two portfolios. We'd also expect that there was a very different risk profile that went along with that. That doesn't mean one is better or worse. It just means what is the objective function you're trying to achieve and how does that achieve those goals for you? >> So they get a higher rate of return, but at the same time they're taking on a lot more risk. >> I don't know if I would necessarily say that they're taking on more risk. Again, risk is can be measured in a variety of different ways. What I would say is that their asset allocation is different and especially against the backdrop of what the global public equity markets have done the US in particular. My understanding is that they had a sizable allocation to the US markets. We would need to look at that and understand that. I don't think I would conclude that they had to take more risk. I would conclude that they had a larger allocation to uh public equities that they benefited from the rally that we've saw that we saw in the public equity markets and provided that they were able to beat their benchmark and provided that the risk of that portfolio was in the limits and tolerances that they have set out for themselves then that's a good outcome. CPP Investments has many offices throughout the world employing many investment professionals and I'm wondering why you have so many investment professionals. Why not just bring it closer to home and maybe allocate more capital toward ETFs? The S&P, for example, was up 16% in 2025. The TSX was up 30%. Why not just make a large investment in one of those products? E >> ETFs are a fantastic tool for many investors. for investors that have the scale resources and competitive advantages that an investor like the CPP investment board has. you can generate greater returns through active management. And we leverage those ingredients to deliver better returns for Canadians than what they could achieve through ETFs alone. And you touched on this earlier, but I'm not sure if I uh maybe I should expand on it a bit, but in terms of your timeline, okay, are you looking at five years, 10 years, how many years are you looking at when you make an investment decision? >> For active equities, our sweet spot is that 3 to 5 year, but that doesn't mean that we're constrained by that. So, for example, you know, our portfolio turns over at around somewhere between 20 and 25%. which roughly translates into a four or five year holding period. But we have a number of investments that we've held for much longer than that. In fact, one of our uh largest investments we've held for over a decade as an example. That's active equities. The as you move across strategies that horizon is going to change. So for example, you would naturally expect that some of our investments in our real assets portfolio have a much longer duration. The infrastructure investments that we make would be looked at over decades, not over a three to five year horizon. Similarly, as you think about investments that we have within our private equity space, you would expect those to be uh, you know, longer duration assets, not as long as our real assets, but something a little bit longer than the public assets. Uh, within our credit space, we have investments that may, you know, only be a couple years to investments that might be a decade long. So each investment strategy has its own optimal horizon. >> Well, Frank, this has been a great discussion and I want to thank you very much for spending time with us today and sharing the investment process of CPP investments. If our viewers would like to learn more about CPP Investments, where can they go? >> They can go to our website at cppinvestments.com and I'd highly recommend that they read the annual report. And thank you for having me, Jimmy.
CPP Investments | Frank Ieraci and Jimmy Connor
Summary
Transcript
We are uh very very riskaware. I would not uh want to confuse uh the fact that we take what we do very very seriously. We are here for one reason and one reason alone and that is to uh provide retirement income for the 22 million Canadians uh who contribute to our beneficiaries to the Canada Pension Plan. Frank, thank you very much for joining us today. So, you are the global head of active equities at CPP Investments and CPP Investments is one of the largest pension funds in the world with over $780 billion in assets under management. And I think many Canadians are quite familiar with Canada pension plan, but they're not so familiar with CPP investments. So maybe you can just clarify for us how CPP investments helps Canadians achieve financial stability. >> The CPP that most Canadians uh may interact with more often is uh the part of the ecosystem if you will that collects their contributions and pays the beneficiaries. Uh in 1997 there was an act of parliament that created a crown corporation called the Canada Pension Plan Investment Board and that organization was set up specifically to manage the uh the monies within the CPP >> and if we look at total assets under management 780 billion approximately what's the breakdown between public equities private equities real estate fixed income >> we have approximately 45% in public equities another 25% in private equity about 15% in uh you know fixed income in credit and the remainder in our uh real assets which includes like infrastructure investments and real estate investments >> and what percent of the 780 billion would be allocated toward Canada >> uh about 12% which translates into you know just north of uh 100 billion I think it's about 115 billion >> and that's public private real estate fixed income You got it. Yeah. Across all of those asset classes. >> And Frank, you are the global head of active equities. What exactly does your job entail? >> I lead a group that is responsible for delivering alpha in the global public equity markets. The way we do that is through our proprietary fundamental research. Our goal is to try to find companies for which we have a differentiated or unique point of view and that have really interesting and attractive investment return potential. We make those investments and assemble those investments into a uh market neutral portfolio. >> And because you manage global money, many money managers will benchmark themselves to an index like the MSCI World Index where the US has a large waiting 70%, Canada relatively small at 3%. Maybe you can speak to that if you benchmark yourself to that index and also if you could speak to capital allocation. So as an active investor, we absolutely benchmark ourselves. That's key to understanding have we delivered, you know, have we outperformed um a passive index through active management. We have a number of different benchmarks depending on the asset class and the geography that we use throughout you know the different strategies. As far as CPP investments is concerned, uh MSCI World Index is not our benchmark for example. uh but if you take a step back I think that you know really what we're talking about here is is uh asset allocation. There are many investment managers that will target a specific asset allocation and those tend to be roughly static. So they'll say we're going to allocate you know 30% to the US or we're going to allocate uh 25% to a particular asset class. And for CPP investments it works a little differently. We target a risk level and what that allows us to do is be more flexible in the way we think about the asset allocation through by targeting through the risk level we can think about where are the most attractive riskreward opportunities where do we get the most attractive relative value and that allows us to think about where which sectors geographies or asset classes we want to be in. Now it's all within that risk envelope if you will. So we then measure our investment portfolio through the lens of a a um uh that that risk envelope and we have limits and so on and so forth on that but we try to manage to that level and maximize returns at that level giving ourselves that flexibility to think across as I said the different asset classes geographies sectors so there's two elements to it there is the the risk targeting and then a asset allocation that happens against that risk target and we think about remember this is a uh we this is a a multigenerational fund right so we are thinking about not the next year or the next five years but the next 25 years so we look at the performance of different asset classes different geographies um different sectors and really what we're trying to do is find what is the optimal mix that delivers us the maximum returns without undue risk of loss going back to what our our mandate is um and within that we will have allocations to the the different strategies, right? So that that'll that'll imply an allocation to for example private equity. Okay. When we when we think about how we then deliver that exposure, it's done through active management and that starts off with the security selection decision. What are the specific investments in companies that we are going to make and that happens bottom up. So you could think about the CIO thinks about what is that asset allocation given the risk levels that we're trying to achieve. What delivers a resilient and diversified portfolio against that risk level? That determines roughly speaking the ranges that we would want in the different asset classes. And then Ed, our CIO, will come to Frank and say, "Frank, I need you to deliver me alpha within the global public equity markets. and here is the capital that I need you to deploy. When I get that capital, my my question then becomes where do we think there are the most attractive opportunities globally in the public equity markets? And we start off with a very bottoms up kind of fundamental approach to thinking about those companies. We have roughly a kind of three to five year horizon. Our goal is to identify where we think we truly understand what is going to matter to that company and where we think we have a unique point of view, a differentiated insight that leads us to believe that there's a an attractive opportunity, a mispricing in that company. We organize ourselves around uh industries. We call them domains. We we kind of start off with the classic industry definitions, but tweak them uh to be a little bit more thoughtful in how they're constructed. And we build expertise within each of those domains. And the folks that are responsible for that are respon the folks that build that expertise are responsible for ultimately coming up with the ultimately executing the research and coming up with the ideas within that domain of the individual companies that we ultimately would invest in. So you see that it kind of ends up being this uh two-pronged approach. there is an asset allocation but not quite in the way that traditional money managers would do it where they are a little bit more static. It's more of a a risk targeting that then determines ranges for the different asset classes and then a bottoms up approach that really focuses on the security selection to deliver the alpha and the outperformance relative to uh a more passive benchmark. >> And maybe you can speak to country risk because we are living through some unusual times right now. There's a lot going on in the world. We still have war in the Ukraine, hostilities in the Middle East, we have the recent situation in Venezuela. How do all of these global factors or political events come into the decision-making process? >> Uncertainty and risk are not new to active investors, right? We are I mean the very nature of investing is decision-m under uncertainty. uh I think what has changed today is simply the uh the number of different forms of uncertainty that are present simultaneously and that is a challenge for sure as it relates to the security selection decision. I go back to what I said earlier. You know, we have a very disciplined approach. It starts with a deep understanding of the sector or domain that we're looking at and an understanding of what are going to be the fundamental fin or fundamental or financial drivers of that company over that 3 to 5 year horizon. That sounds simple. It's actually tougher than it sounds. Uh companies are dynamic and they operate in uh very competitive ecosystems. So it's a deep understanding just to get to the point where you kind of where you have the ability to say, "Hey, I I kind of get what the strategy is today. Where is that strategy going? What does that mean for what matters to the to the fundamentals?" Then the real work begins and that's where the fundamental research kicks in. all of what you described in terms of those um uh those risk factors, the the uncertainty that we're seeing in the world today, the geopolitical tensions, the uh the nature of of uh different economies and war in Ukraine, so on and so forth. These are all things that we would have to take into consideration, but not necessarily in the way that you might be thinking. We look at it and say, is this something that is fundamental to the company? Can we have a deep and differentiated point of view on it? And if the answer is no, then we don't invest. We look for other opportunities. And if we do believe that because of our platform, the access to information that we have that we can develop a unique perspective on some of those things, then we would incorporate it in the underlying uh assessment of the fundamentals of the business. >> Okay, let's bring it closer to home now and discuss the Canadian economy. It's been relatively weak. It's still growing but at a very modest rate. GDP per capita has been declining now for many quarters. Labor productivity has also been in a decline for quite some time. Unemployment continues to climb across the country. And then we still have all this uncertainty associated with trade negotiations between Canada and the US. And so when you look at the situation closer to home, how do you maneuver all of that when it comes to making investment decisions? Look, as I said before there, you know, Canada is uh an important uh an important market for us. We have 12% of the assets our assets in Canada and by any traditional measure of asset allocation that you would see from you know other uh global investment managers that is a significant overweight. So I think it speaks to you know what we believe is a strong market and we continue to it's our backyard. So this is exactly where we uh where we operate, where we want to play, where we look for investments. These types of risks that you mentioned are uh important for us to consider. We absolutely do. And we continue to look for attractive opportunities against those uh those risks where we think that we are appropriately compensated for those risks and avoiding places where either we don't think that that compensation is is enough or where we don't think we have a real deep insight or understanding where just the uncertainty is at a level that we can't uh we can't make an investment. >> And the Canadian economy has a very rich resource sector. Does CPP investments invest in the Canadian energy or mining sector? >> We do. Uh there's no we don't take an approach where there's some sectors that are on or off. We don't have u you know a top- down kind of uh view of, you know, this is good, this is bad, we're going to invest here, we're not going to invest there. As I said, you know, there's an asset allocation strategy and then each of the individual um investment teams look for opportunities within those asset classes. So we have invested there before and we will continue to invest across Canada, not just within those sectors but but certainly within the energy and mining space >> and many leaders within those sectors, the mining industry especially have been very critical of Canadian pension funds saying they don't invest enough in the mining industry versus somebody like of the Australian pension funds. What would be your response to that criticism? I I would say that our goal is not to invest in any individual sector. Our goal is not to support you know a sector here or anywhere. Our goal is to generate returns that pay pensioners. Our goal is to maximize returns without undue risk of loss. And so if we see opportunities, we will absolutely take them. >> I want to ask you about gold now. It's been a big outperformer in the last two years. It was up 25% in 2024, up 60% in 2025. There's many reasons for this, but one of the reasons has to do with central bank buying. Ever since 2022, central banks have taken their buying from 20% of annual production up to as high as 30%. And then, of course, we have the fiscal situation in the US with the federal debt level at $40 trillion, interest payments approaching a trillion dollars a year. Does CPP Investments have any investments in physical gold or gold miners? >> I don't believe we have any investments in physical gold. um from that asset allocation framework that I shared with you earlier that's not part of the you know asset class uh structure that we uh that we apply um but certainly within individual companies we would and have made investments in uh the mining space in general across all types of miners including precious metal uh right now within active equities we don't have any investments within uh the gold space or the you know with gold miners and coming back that's not a that's not a a Paul specifically on um that that space in general. It's a really just a reflection of what is it that we're seeing from a value a valuation perspective and where do we think that we have attractive opportunities? Where do we think we have differentiated insights? >> So because of the move we've seen in gold at or near $5,000 an ounce, the producers are trading at a very rich valuation. So therefore, it just doesn't meet your bottoms up approach to value investing. Yeah, when you start seeing I mean that it's been a pretty it's been a pretty terrific run and it means that the expectations going forward are even higher and what for us what we're looking at is the the company specific fundamentals and this kind of makes gold investing unique relative to the other sectors because there's a commodity price component that you can't ignore and that is very very important and that does drive the economics of the business and the fundamentals but it is driven by factors outside of the control of the company, their management, their strategy or the competitive dynamics in the in the markets that they operate in. So our go our approach needs to be dualpronged. We need to understand what are the dynamics in the gold market as well as what are the company specific um strategies uh that are are being deployed and whether or not we can develop a differentiated point of view. When you have the market run as strongly as it it has, it does create a higher hurdle for us to really get comfortable that we still see value there. >> Now, what about energy? Oil's trading around $65 $70 a barrel. Do you see value there? >> Energy is a really interesting space when you think about just the energy transition, the use, you know, given um the rise in AI, compute and data centers. So yes, overall I would say that there is uh we certainly see value and it is in pockets, different spots. It's um going back to what we said before that bottoms up approach you know hopefully leads us to the to uh identify those opportunities within those spaces that are the most attractive. >> And just with regard to energy under the previous Liberal government when Justin Trudeau was prime minister I think it's safe to say that government was anti- oil. Now under Mark Carney, it seems like they're they have a more positive stance toward energy and building out this this sector of the economy. Is this something CPP investments would invest in? Would you invest in pipelines or building out other aspects of the infrastructure? >> Look, we would evaluate any opportunity. Um, and what we need to be convinced of is that there's an actual, you know, economic case to be made and that and that there's durability to these assets. So if we were presented with an opportunity uh we would certainly be interested in evaluating it within the automoility domain is you know you think about um the as I said you know we structure these these clusters of companies into what we call domains and you start off roughly speaking with the definition of an industry and then you fundamentally change that right autom is our for you know simplicity sake is our auto domain but it includes more than just automakers. It's the entire value chain. That entire value chain will include things like um the energy, right? It'll include things like batteries, so on so forth. So from when we start to we think that there's some really interesting opportunities in the automoility domain and some of that comes from the battery producers. >> Frank, I want to ask you about artificial intelligence. Now, that's been one of the big drivers we've seen in the markets here in the last few years. Chat GPT was released in November of 2022. At that time, OpenAI was valued at $20 billion. Here we are a few years later, it's now valued at $500 billion based on the last raise. Still a private company, but CPP investments have any exposure to artificial intelligence andor the data centers that are required to build out this sector? We do uh we do have investments across the AI landscape including data centers. Uh data centers in particular is an area that we've spent uh more time researching primarily through our real assets group and uh a team within that group called infrastructure. Um these are investments that we've made uh not just in the US but globally and um that we we continue to we continue to evaluate the space. It's very very interesting uh very dynamic, very fluid. So moving quickly um but as I said you know using that the bottoms up approach in terms of our security selection but also the power of the platform the things that we can do uh across the globe with uh different investment partners is is pretty impressive. It is really a a world-class organization in in terms of the types of things we can do as well as the um uh types of opportunities that we get to be uh an investor in. So we've made a number of investments across that across the AI landscape. >> Now there's been a lot of concern associated with valuations and you spend you mentioned earlier you spend a lot of time looking at businesses from a bottomup point of view. Are you concerned at all about the valuations that we're seeing right now? It's a very interesting time right now where there is a a high degree of concentration in the S&P 500, you know, with the Mag 7. Um, but this is I I find this, you know, very similar to the conversation that we had about gold, right? And, you know, even more so the conversation we have about just risk and uncertainty on a on a global level. All of these things are just part of the um the calculus that goes into an investment decision. So it's about understanding what are the drivers, what are the underlying economics, can we get a differentiated point of view. Um we see pockets where there's still a tremendous amount of value. We were a big investor in Nvidia for many years. Uh our first investment I think started in 2018 on the back of a thesis that was predicated on uh GPUs and the usage within the AI ecosystem. uh we held that all the way through 2025. It was a tremendous investment. Uh and look for many points in that time period. Uh we needed to rethink and reunderwite. And in hindsight, it's easy to say, "Oh, that was successful." But at any given point in time, we needed to think about what was being priced in in the market, what was our unique point of view, and where we getting the most interesting uh riskreward potential from that relative to other investments. It's the same today. >> And many people have compared what's happening right now with AI valuations to the tech bubble of the early 2000s. Do you share any of those concerns? >> I don't really think about it that way. I understand why why people would make that analogy. Uh anytime there is uh new technology there's a degree of you know almost like euphoria that comes with it. So I can appreciate that that there that there is a temptation to do that. But each of these situations present so many unique features that it's difficult for me to look at one and say this is this is a carbon copy of what this other thing is. Um, you know, I just shared with you kind of the Nvidia story. There were points in time where where there was a lot of skepticism around the underlying demand for Nvidia's GPUs and at that time it was seen as being euphoric and yet we have had uh tremendous resilience in in that that underlying demand. So I think you have to approach each situation understanding the unique circumstances that underpin it and not necessarily paint with broad brushes. Ah AI is overvalued or AI looks like the tech bubble. I think you need to really pick and choose the spots and understand what is it that is driving this particular company. How sustainable is that and then from there draw the conclusions. >> EVs have become very popular here in the last five or six years. Do you have any investments associated with EVs? >> We do. Uh it's an interesting uh sector for us. We tend to think about kind of the auto sector across that entire value chain from the automakers to the suppliers to you know battery manufacturers. Um and there's a we think that there's some very interesting opportunities across that space globally. I was recently in Austin, Texas, and when I was there, I took out one of these autonomous driving vehicles, which is operated by Whimo in partnership with Uber, and I was blown away by its capabilities. Do you have any investments in these autonomous driving vehicles? >> We do. We're actually investor in Whimo. Uh Whimo is an Alphabet company. We were a very early investor. Uh I'm glad that you had a a good experience. It is a It is a really interesting and tremendous company. It's been a very um it's been a very successful investment for us. They are expanding through different cities. Now, uh what you experienced in Austin, Texas was a partnership with Uber, but in other cities across the US, they are triing different types of partnerships to see, you know, what what kind of makes the most sense for their their business strategy. Uh but it is a pretty unique experience getting into one of these vehicles and uh just seeing the capabilities that are are available today um and how uh just how precise it is in driving. >> So I have to admit I'm very surprised that CPP Investments has investment or had an investment in Nvidia. You also have one in Whimo. Uh I guess it surprises me because I thought you would be a lot more conservative in your approach, but it sounds like you're very open-minded toward new investments. Absolutely. I mean, look, there's a couple things I would say. One is um and it goes back to what I said earlier. It we we have a platform that allows us to really try to identify where we think the most attractive investment opportunities are globally and across different asset classes. uh we have uh tremendous people doing this all over the world and we're not constrained to any particular notion of investment style or even horizon. We can think about things in a shorter term and a longer term. So it's I appreciate why that might be surprising to uh to somebody who is looking at a pension plan and thinks about uh a pension plan as being you know conservative maybe even sleepy and what I would say is we are uh very very riskaware. I would not uh want to confuse uh the fact that we take what we do very very seriously. We are here for one reason and one reason alone and that is to uh provide retirement income for the 22 million Canadians uh who contribute to our beneficiaries to the Canada Pension Plan extremely seriously and the risks that we take we are taking with a mindset towards delivering returns. But with that said we are a a worldclass and sophisticated platform. The fact that we've made investments in some of the world's most um in some of the world's most interesting some cases largest companies is not by accident. It's by, you know, 20 years of building out capabilities to um to uh develop strategies and teams that can prosecute and execute investment ideas across strategies across the globe across uh asset classes. >> I want to ask you about one of your competitors now and that's Nores which is the sovereign wealth fund for the country of Norway. Norway is a very small country, only five million people, and it's not really a pension plan per se. It receives its revenues from the oil and gas industry, but it will invest those assets or those revenues on the behalf of the people of Norway. My sense is they're a lot more aggressive with their money, and they just released their 2025 performance numbers. They were up 15% on the year, and which I was really surprised to see. Like, that's 15% is a big number. Maybe you can just speak to that. And when I look at Nortis, is it comparing apples to apples? When I compare it to CPP investments, >> it's really So, short answer is no. It's not really comparing apples to apples. Um, and that's not just with Norges. I think it's with any pension plan or sovereign wealth fund. And you kind of touched on this, Jimmy, where uh just the aggressive nature. And it doesn't even necessarily mean that it has to be aggressive. It's it's an asset allocation strategy that um that is appropriate for the objective function that these different uh you know sovereign wealth funds or pension plans are trying to achieve. But what that means is that the that asset allocation the way they think about that objective function is going to differ and then comparisons become tough. So just to give you an example of why I say that Noris has approximately 70% of their fund within public equities. So if we think about this if you had a portfolio that was 70% equities and 30% fixed income and I had a portfolio that was the inverse of that. If I had 30% equities and 70% fixed income, we would expect that there would be a different return profile for those two portfolios. We'd also expect that there was a very different risk profile that went along with that. That doesn't mean one is better or worse. It just means what is the objective function you're trying to achieve and how does that achieve those goals for you? >> So they get a higher rate of return, but at the same time they're taking on a lot more risk. >> I don't know if I would necessarily say that they're taking on more risk. Again, risk is can be measured in a variety of different ways. What I would say is that their asset allocation is different and especially against the backdrop of what the global public equity markets have done the US in particular. My understanding is that they had a sizable allocation to the US markets. We would need to look at that and understand that. I don't think I would conclude that they had to take more risk. I would conclude that they had a larger allocation to uh public equities that they benefited from the rally that we've saw that we saw in the public equity markets and provided that they were able to beat their benchmark and provided that the risk of that portfolio was in the limits and tolerances that they have set out for themselves then that's a good outcome. CPP Investments has many offices throughout the world employing many investment professionals and I'm wondering why you have so many investment professionals. Why not just bring it closer to home and maybe allocate more capital toward ETFs? The S&P, for example, was up 16% in 2025. The TSX was up 30%. Why not just make a large investment in one of those products? E >> ETFs are a fantastic tool for many investors. for investors that have the scale resources and competitive advantages that an investor like the CPP investment board has. you can generate greater returns through active management. And we leverage those ingredients to deliver better returns for Canadians than what they could achieve through ETFs alone. And you touched on this earlier, but I'm not sure if I uh maybe I should expand on it a bit, but in terms of your timeline, okay, are you looking at five years, 10 years, how many years are you looking at when you make an investment decision? >> For active equities, our sweet spot is that 3 to 5 year, but that doesn't mean that we're constrained by that. So, for example, you know, our portfolio turns over at around somewhere between 20 and 25%. which roughly translates into a four or five year holding period. But we have a number of investments that we've held for much longer than that. In fact, one of our uh largest investments we've held for over a decade as an example. That's active equities. The as you move across strategies that horizon is going to change. So for example, you would naturally expect that some of our investments in our real assets portfolio have a much longer duration. The infrastructure investments that we make would be looked at over decades, not over a three to five year horizon. Similarly, as you think about investments that we have within our private equity space, you would expect those to be uh, you know, longer duration assets, not as long as our real assets, but something a little bit longer than the public assets. Uh, within our credit space, we have investments that may, you know, only be a couple years to investments that might be a decade long. So each investment strategy has its own optimal horizon. >> Well, Frank, this has been a great discussion and I want to thank you very much for spending time with us today and sharing the investment process of CPP investments. If our viewers would like to learn more about CPP Investments, where can they go? >> They can go to our website at cppinvestments.com and I'd highly recommend that they read the annual report. And thank you for having me, Jimmy.