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Canada Pension Plan's returns hit by strong domestic currency

TORONTO (Reuters) - The Canada Pension Plan Investment Board (CPPIB), the country's biggest public pension fund, on Friday reported slower growth in the second quarter, hurt by the strength of the Canadian dollar. The CPPIB, which manages Canada's national pension fund and invests on behalf of 20 million Canadians, said it delivered a net investment return of 0.6 percent in the second quarter to the end of Sept. 30, down from 1.8 percent in the previous quarter. Its net assets increased to C$368.3 billion at the end of September, compared with C$366.6 billion three months earlier. "Foreign currency exchange-rate declines relative to the Canadian dollar were the fund's main headwind during the quarter," Chief Executive Mark Machin said in a statement. 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 four-month high in September, means that overseas earnings are not worth as much when they are converted back to the fund's domestic currency. The fund does not hedge against currency movements, saying that, while they may impact its results in the short-term, it does not expect them to have a significant impact on its long-term performance. In May, CPPIB reported an 11.6 percent return on investments in its latest fiscal year but warned that double-digit growth was not sustainable with competition for assets intensifying. Canadian pension plans, on average, achieved returns of 0.1 percent in the latest quarter, according to research published by RBC Investor & Treasury Services on Tuesday. (This story corrects to previous quarter in second parapgraph, from same quarter last year) (Reporting by Matt Scuffham; Editing by Chizu Nomiyama and Susan Thomas)

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