Plan sponsors turn to alternatives

Hammered by poor returns, pensions turn away from public equities.

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story_images_bridgestructureHalf of Canadian plan sponsors (48%) aim to boost their allocations to alternative investments as they seek long-term returns that are less correlated to public equity markets according to a new report by RBC Investor Services. It also finds that 70% of pension funds have funding levels lower than 90%.

“Canadian pension plans are increasingly looking to the alternatives asset class for long- term assets that are better matched to their liabilities, and less tied to the swings of the stock markets,” said Scott MacDonald, Head, Pensions, Insurance, and Sovereign Wealth Strategy for RBC Investor Services. “With many governments seeking investors to renew ailing infrastructures, there are deals to be made and pension plans are looking to gain exposure to these assets in their portfolios.”

Other key findings include:

  • Of the 48% planning to boost their exposure to alternatives, 88% hold over $1 billion in assets
  • 45% plan to add real estate while 34% plan to invest in infrastructure
  • 61% have no plans to stop offering a DB plan
  • 39% have already closed their plans to new members and 27% have opened DC plans – a further 12% plan to go the DC route in the next two to five years.
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