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(May 3, 2016) A Boston Consulting Group study shows the strength of Canada’s top 10 pension plans, three of which are among the 20 largest funds worldwide. They have tripled in size since 2003, mostly due to impressive investment returns.
Their success is attracting attention.
“Have Canadian pension funds established a template to navigate a high volatility, low return world achieving impressive results while mitigating risk?” asks Joel Kranc, writing for Investments and Pensions Europe (IPE).
The model is a relatively recent phenomenon, writes Kranc.
“In 2006, the Canada Pension Plan Investment Board (CPPIB) … adopted an active management strategy to seek returns above those available from public market investing, by capitalising on our comparative advantages, which are structural – long-term investment horizon, certainty of assets, and scale – and developed,” Michel Leduc, a senior managing director at CPPIB, is quoted saying.
“Together, these advantages provide us with greater scope and a different perspective than many other investors. We are not forced to seek short-term returns, and can pursue large, complex transactions where there is less competition.”
The strategy has left CPPIB with a “global diversified portfolio of public equities, private equities, real estate, infrastructure and fixed income instruments, using both active and passive strategies,” continues Kranc.
The Canadian model, he adds, continues to grow and develop, turning to the Healthcare of Ontario Pension Plan to illustrate the point.
The fund, explains Darryl Mabini, senior director, growth and stakeholder relations, follow two strategies: a return-seeking portion, which invests in alternative investments and global markets, and a “liability-driven investment (LDI) model where investments (like fixed income) are matched to the liabilities to ensure future obligations are met,” writes Kranc.
“HOOPP has also realised savings from internal management. In 2010, for example, operating costs were C$129.2m, down from C$131.3m in 2009. The decrease is primarily related to the elimination of external investment manager fees. HOOPP’s investment operating costs work out to just under 26 basis points, according to the fund,” he continues.
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ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans – ARIA pensions blog, 12 Dunlop Street, Barrie, ON, L4N 1V6 – sitemanager@ariapensions.ca

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