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Laxman Pai, Opalesque Asia: As an effective way to derisk, Canadian defined benefit plans are gravitating toward greater allocations to alternative investments, said a survey.
A survey from RBC Investor & Treasury Services revealed: "Canadian defined benefit pension plans are continuing to explore various types of alternative investments to provide higher risk-adjusted returns over the longer term and enhance the sustainability of their plans."
The annual survey, which includes the aggregate responses of 122 pension plans across Canada, cites the use of alternative investments - in particular, real estate and infrastructure - as an effective de-risking strategy, second only to liability-driven investments (LDIs).
Liability-driven investments (LDIs) were considered the most effective de-risking strategy but continued their decline from a high of 39% of pension plans in 2017 to 26% in 2020.
As of November 2020, 96% of large plans (characterized as those with over $5 billion in assets) and 73% of plans overall either held alternatives or intended to add them within the next 12 months.
The confidence of Canadian pension plans received an overall score of 4.0/5 in 2020 (versus 4.4 in 2019 and 3.8 in 2018).
"We're continuing to see this gradual shift towards alternatives, as well as a noticeable decline in fully-funded plans (50% in 2020 versus 66% in 2019) despite the favorable net returns in 2020," stated Niki Zaphiratos, Managing Director an...................... To view our full article Click here
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