Canadian investors should lower their expectations for outsized market returns, warns the head of Canada’s largest pension fund.

Stocks, real estate and other global assets are full valued and are will likely see more modest returns for the time being, Mark Machin, CEO of the Canada Pension Plan Investment Board (CPPIB) told BNN in an interview.

“Most asset prices are quite rich around the world so we are going to be careful and cautious about where we invest,” he said. “It also means that expectations about returns from relatively full value are going to be lower for a period of time.”

CPPIB manages more than $298 billion in assets on behalf of the Canadian Pension Plan. The fund reported a net investment return of about 6.9 per cent in December.

The fund is looking to increase its investment return by looking for more alternative investments, he said. “We find opportunities by looking at other asset classes, other strategies, other geographies, and not following the crowd into really crowded trades,” he said.

Machin’s comments come just two days after the Ontario Teachers’ Pension Plan (OTPP) reported a rate of return of 4.2 per cent, down from 13 per cent in the same period in 2015. The fund cited unfavorable currency movements as one of the primary sources of weakness.

CPPIB’s long investment horizon makes hedging Canadian currency risk impractical, says Machin. The CPPIB also has a diversified portfolio of global investments that also act as a natural currency hedge, he says.