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Canada Pension Plan Investment Board executives have taken to prefacing any comments they make to pretty much anybody with "You'll be fine. The CPP is fine."

And judging by the results the big money manager turned in, they're right. Overall investment returns were negative 6.7 per cent in the final three months of 2008, a time when equity markets around the world plunged by three or four times that amount. On top of that, CPPIB has built in demographic protection, saying it has 11 years before any of its current assets will be needed to pay benefits.

Unlike Ontario Teachers Pension Plan and some other funds that need money soon, the CPP fund is the pension version of a person still eyeing a distant retirement and looking at a smorgasbord of cheaper assets in the meantime. This may well be a very good thing for Canadian pensioners.

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But that doesn't mean there won't be a significant amount of noise in the short term about declining fund values. Even if equity markets stabilize in 2009, which they show few signs of doing, there are parts of the CPPIB portfolio that face further challenges.

The 7-per-cent weighting in real estate is likely in for a drop in value as commercial real estate brokers say that Canada is on the cusp of a big drop in values for the kinds of malls and office towers that CPPIB invests in as soon as the market vacuum ends and properties actually start to change hands. Similarly, the private-equity portfolio that accounts for about 15 per cent of the overall fund may face drops in the book values for some investments, especially those tied to oilfield equipment, retail, media and real estate.

The nice part for CPPIB is that many of those investments, especially those in retail, may decline in value but the rent and dividend checks should continue to roll in, along with contributions from Canadians' paychecks, giving the fund a chance to reinvest at depressed prices.

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