Large number of Canadians are missing out on pensions
According to a report by the National Insitute on Ageing, there are around 200,000 people in Canada with registered pension plans who are eligible to claim them, but haven鈥檛. Often, the unclaimed funds stem from contributions made early in a person鈥檚 career that were simply forgotten about.
Political pressure impacts Canada's top pension funds
Canada鈥檚 Maple 8 pension funds are globally respected for strong returns and independence from government influence. However, recent political moves threaten this model. The federal government has encouraged more domestic investment, while Alberta鈥檚 government fired AIMCo鈥檚 board, raising fears of political interference.
Financial institutions shift climate strategies amid GFANZ changes
Despite BlackRock鈥檚 exit from the Glasgow Financial Alliance for Net Zero (GFANZ), climate action remains a key priority for financial institutions, says Sebastien Betermier, Associate Professor of Finance. He notes that asset managers are shifting their strategies to focus on helping firms transition to net zero rather than maintaining strictly net-zero portfolios.
Alberta-commissioned report on CPP withdrawal used flawed methodologies
When Alberta commissioned a report on withdrawing from the Canada Pension Plan, the resulting document claimed the province was entitled to $334 billion more than half of the plan鈥檚 total assets. However, the method used to calculate that share is deeply flawed. If applied to other provinces, the combined total of their share would exceed the plan鈥檚 actual assets.
Challenges of adapting Canada鈥檚 pension model for the UK
In a Financial Times piece on the UK鈥檚 interest in replicating Canada鈥檚 pension system, Associate Professor Sebastien Betermier highlights concerns about the growing politicization of Canada鈥檚 pension funds. He notes that the success of the Maple 8 model relies on maintaining independence from government interference.
Making strategic assets available to pension funds would encourage more domestic investment
Canadian pension funds have a mandate to deliver steady pension payments to millions of plan members, writes Professor Sebastien Betermier in Benefits Canada. But that鈥檚 easier said than done, and the most cost-efficient way to deliver is by investing in a globally diversified portfolio tilted toward strategic assets.
Instability at Alberta鈥檚 public pension fund could undermine its effectiveness
While 2020 was tough on just about everyone, the Alberta Investment Management Corporation (AIMCo) really took it on the chin. Alberta鈥檚 public pension fund manager lost billions of dollars in a volatility-based trading strategy during a topsy-turvy year in markets.
Canadian pension funds are already overweight on Canadian equities
Canada鈥檚 eight largest pension funds are big players in the world of institutional investing with more than $1 trillion under management collectively. Pressure is being applied for the funds to invest a greater proportion of their money in Canadian stocks.
Changes in pension funds portfolio management produce different demands for analysts and managers
Historically, pension funds managed their portfolios using a strategic asset allocation approach. Fundamentally, this meant buying a mix of asset classes with the highest probability of achieving the necessary returns, at a level of risk that was acceptable 鈥� or buying and holding. But since the mid-2000s, some large pension funds have adopted a total portfolio approach strategy, which seeks to maximize returns while keeping a portfolio鈥檚 volatility low.
A lack of strategic assets can be a deterrent to domestic investment for large pension funds
In 2023, the Government of Australia suggested that some of the country鈥檚 pension assets might be used to fund social housing or renewable energy. The idea received mixed reception, and to understand why, Lachlan Maddock of Investor Strategy News looked to Canada, where a group of business leaders called for pension funds to increase their holdings of Canadian equities.
Opening infrastructure could encourage Canada鈥檚 pension funds to invest more domestically
The Government of Canada is exploring ways to increase investments in the country鈥檚 pension fund equities, but doing so sacrifices returns, according to The Economist. Over the past decade, Canadian mid and small-cap stocks have returned just 3-4% each year, while U.S. stocks have seen a 13% return annually. Opening infrastructure to investment is another way to encourage pension funds to invest more of their capital domestically.
Domestic investment: Should Canadian pension funds focus on local companies?
Canada鈥檚 biggest pension funds are some of the world鈥檚 largest investors and their diversified portfolios span the globe. But, should they be investing more in Canadian companies? Some CEOs think so. In March, 90 CEOs signed an open letter to Finance Minister Chrystia Freeland urging her to find ways to get pension funds to invest more in Canadian companies.
Negative real estate returns have some pension funds considering a change in approach
Over the past few decades, Canada鈥檚 big pension funds have piled into direct real estate investments. But, as higher borrowing costs hit property markets, returns have gone negative. Some funds are considering whether they should take a step back and make this type of investment through third-party managers.
Sustainable investing doesn鈥檛 only mean companies that are already green鈥攍arge investors can push polluters to become greener
Many pension funds are pledging to invest in green assets with net-zero emissions, but these investments tend to yield lower returns than the broader market index. Beyond that, a hard shift toward green investments could remove the incentive for heavy emitters to clear up their act.
New York City Public Pension Fund pushes RBC for energy transparency
The New York City Public Pension Fund has pushed Canada鈥檚 largest bank to deliver greater transparency about its investments in green energy and fossil fuels. The Royal Bank of Canada (RBC) will begin publishing the ratio between the two types of energy investments in its portfolio.
