Canadian DB pensions holding about equal weight in stocks, fixed income: report

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Canadian defined benefit plan sponsors are holding an almost equal amount of fixed income and equity in their portfolios, according to the Pension Investment Association of Canada’s 2019 asset mix report.

The report found the PIAC’s membership reported a total of more than $2.2 trillion under management last year, up from just under $2.1 trillion in 2018.

Overall, fixed income mandates made up 31.83 per cent of DB pension portfolios. Canadian universe bonds were the weightiest category at 8.45 per cent, followed by long-term bonds (7.34 per cent), global bonds (4.68 per cent), multi-strategy debt (3.01 per cent) and real return bonds (2.18 per cent). Other forms of debt were less represented, including emerging market debt (0.88 per cent), mortgages (0.78 per cent) and high yield credit (0.43 per cent).

Public equity mandates made up a slightly higher overall proportion of portfolios at 32.23 per cent. Global all cap (17.48 per cent) was by far the most popular mandate, followed by Canadian all cap (3.79 per cent), emerging market equity (3.77 per cent) and global large cap (3.35 per cent). In 2018, global equities (20.47 per cent) took the top spot, with Canadian equities (4.29 per cent) coming in second.

As for alternatives, total mandates for 2019 came to 39.48 per cent of portfolios. Private equity (12.45 per cent) and real estate equity (12.09 per cent) were the standouts, followed by infrastructure equity (7.66 per cent). Other alternatives, including private debt (1.82 per cent), hedge funds (1.11 per cent) and commodities (0.9 per cent) were far less popular. In 2018, real estate, including equity and debt, made up 12.78 per cent of DB portfolios, while all infrastructure investments made up 8.15 per cent. Taken together, private equity and venture capital investments took up 12.43 per cent of 2018 portfolios.

As well, DB plan sponsors held just 0.25 per cent of their portfolios in cash as of Dec. 31, 2019, coming to more than $5.6 billion. This represents a significant drop from the end of 2018 when DB plans held 1.72 per cent of their portfolios in cash.

In defined contribution plans, target-risk funds (45.92 per cent) remained the most used asset vehicle in 2019, rising in popularity from 41.67 per cent in 2018. Balanced funds (25.13 per cent) were the second most popular, down slightly from 26.24 per cent in 2018, followed by target-date funds (11.18 per cent), which rose in popularity from 8.62 per cent in 2018. In stand-alone DC funds, Canadian equities (4.52 per cent) were the leader, followed by U.S. equities (3.18 per cent), money markets (2.93 per cent) and  global equities (2.58 per cent).

The total assets under management for all of the PIAC’s reporting DC pension plan sponsors came to more than $27 billion, rising from $24.2 billion in 2018.

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