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Short answer: yes, you are being fleeced. Public equities are the way to go.
Where to begin...
1) Looking at 1yr returns to compare asset classes is not an advisable approach. Why are you under the assumption that PE will outperform SP500 every year? Perhaps I'm the idiot and misunderstood your question.
2) CPPIB manages ~$600B and their objective is to "maximize long-term investment returns without undue risk, taking into account the factors that may affect the funding of the Canada Pension Plan and its ability to meet its financial obligations". Aka we going to be here for a long ass time, volatility matters A TON for cash outflows (pension payments), and we need to follow portfolio management theory + diversify so we don't blow up.... We can't just invest in one asset class, even if it was the highest performing
Also I would encourage you to (I'm not trying to be a smart ass with this one, genuinely) to be read up on portfolio theory - super important topic that most people "interested in finance" don't fully understand.
Tomorrow's lesson will be on mark-to-market and why comparing public to private market returns can be challenging...
An easy interesting lesson in Mark-to-Market is in the movie/documentary Enron:Smartest Guys in the Room 😂 Pretty helpful on what works in finance and why vs infrastructure.
yes, but i think in this particular case this is because CPP has a broader portfolio set to hedge risk. Not all investment are in public equities and as we see stocks are due for a big correction.
CPP is a scam.
The S&P 500 isn’t the best comparison as it’s more volatile. It’d be better to compare it to CPP’s own benchmark, which they’ve underperformed since their inception.
Despite this underperformance, they have distributed millionaire dollar bonuses to their executive team year after year.
A passive management approach as Norway has done would be more cost effective and produce better results for Canadians
Why do we need to pay them $12B a year to barely out perform inflation of 2-3%?
We could pay a monkey 3 bananas a day to do better than that
Risk and volatility are concerns as everyone else has noted. The CPP's mandate is different from your mandate...
No you're not being fleeced. S&P is down ~8% ytd. Imagine telling Canadian retirees you can't pay out their pension because we're in a trade war.
The cherry on top - we are PAYING $12b a year for them to stifle the growth of our wealth by 100-200% every year lol
You can’t look at 1 year returns for a long-term asset class like PE. Private equity almost always lags public markets by 1-2 years, and on average, returns more. You need to look at the trailing 5 year averages for both asset classes to get the full picture
To add to the arguments above, pension also serves as a mechanism to force people to save for retirement. Vast majority of people are financially illiterate and our social infrastructure would cost far more without a mechanism like this. Also, it serves as a mechanism to redistribute wealth. Mission of a public pension fund with 600bn aum is wildly different from your savings account.