LEADING CANADIAN PENSION PLANS REPOSITIONING ASSET ALLOCATIONS, INCREASING IN-HOUSE ASSET MANAGEMENT ACCORDING TO NEW RESEARCH FROM CIBC MELLON
Canada’s sophisticated pension funds are at the forefront of a trend to shift asset management functions in-house – along with associated requirements for investment operations and systems. Even amid rising focus on in-house management, plan sponsors are also becoming increasingly strategic about selection of, allocations to and oversight on external managers, according to a new survey of 50 leading Canadian pension funds entitled, “In Search of New Value: How Canadian Pension Funds are Preparing for a Post-COVID-19 Environment,” published today by CIBC Mellon.
The first instalment of the research, “Investment Strategy: What will life look like after COVID-19?” highlights how Canadian pension funds are preparing increase the portion of assets and investment activities managed in-house to 28% from 22%. In particular, real estate (58%) and equities (48%) are the asset classes where the largest portion of pension funds are planning to increase in-house management over the next 12 to 24 months. That said, the survey also confirms that Canadian pension funds continue to see significant value in leveraging external managers to deliver returns across key asset classes.
“Many Canadian pension funds take a nuanced approach to asset management. Where appropriate, they operate with in-house teams and this appears to be increasing,” said Alistair Almeida, Segment Lead Asset Owners, CIBC Mellon. “Elsewhere, they are pursuing partnerships and collaborations, as well as full-scale outsourcing arrangements. There is no one-size-fits-all arrangement.”
“As the Canadian investment industry works through the market turbulence, early indications are that investors may see this as an inflection point to secure increased transparency,” said Ash Tahbazian, Chief Client Officer, CIBC Mellon. “From gathering information to assist in various risk and performance scenarios, to launching separately-managed accounts with trusted asset managers, initial feedback is that investors are keen to further the gains they have made in enhancing control in recent years.”
Download the Chapter 1 of the study at www.cibcmellon.com/insearchofnewvalueclients can also contact their CIBC Mellon relationship manager to learn more or arrange a detailed discussion of the findings.
Additional findings include:
- Pension funds have significant plans to alter the mix of their portfolio. Notably, 86% of funds expect to reduce their exposure to infrastructure over the next 12 to 24 months.
- The asset class most likely to see a rise in allocations is private equity, where 90% of respondents say they intend to increase allocations over the next year. Almost half of funds (42%) expect to raise their exposures to real estate.
- Almost nine in 10 pension funds (86%) expect to invest more in fixed-income assets in the short term. However, not all funds are taking a defensive stance: 36% plan to increase their allocations to equities, almost twice as many as plan to trim allocations, while 20% anticipate a reduction in the size of their cash holdings.
The survey of 50 leading Canadian pension managers was completed in 2020. Half of respondents had between C$600m and $1.2B under management, and half had more than $1.2B under management.
About CIBC Mellon
CIBC Mellon is a Canadian company exclusively focused on the investment servicing needs of Canadian institutional investors and international institutional investors into Canada. Founded in 1996, CIBC Mellon is 50-50 jointly owned by The Bank of New York Mellon (BNY Mellon) and Canadian Imperial Bank of Commerce (CIBC). CIBC Mellon’s investment servicing solutions for institutions and corporations are provided in close collaboration with our parent companies, and include custody, multicurrency accounting, fund administration, recordkeeping, pension services, exchange-traded fund services, securities lending services, foreign exchange processing and settlement, and treasury services. As at December 31, 2020, CIBC Mellon had more than C$2.1 trillion of assets under administration on behalf of banks, pension funds, investment funds, corporations, governments, insurance companies, foreign insurance trusts, foundations and global financial institutions whose clients invest in Canada. CIBC Mellon is part of the BNY Mellon network, which as at December 31, 2020 had US$41.1 trillion in assets under custody and / or administration. CIBC Mellon is a licensed user of the CIBC trade-mark and certain BNY Mellon trade-marks, is the corporate brand of CIBC Mellon Global Securities Services Company and CIBC Mellon Trust Company, and may be used as a generic term to refer to either or both companies.
Story by: Cision