Canadian pension funds are preparing to increase the portion of assets and investment activities managed in-house to 28 per cent from 22 per cent following COVID-19, according to a survey by CIBC Mellon.
In particular, the report states that real estate (58 per cent) and equities (48 per cent) are the asset classes where the largest portions of pension funds are planning to increase in-house management over the next year or two. 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.
Investors keen to further gains
"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 at 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."
The report also notes that pension funds have significant plans to alter the mix of their portfolio. Notably, 86 per cent 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. Some 42 per cent of funds expect to raise their exposures to real estate. As well, almost nine in 10 pension funds expect to invest more in fixed-income assets in the short term.
However, not all funds are taking a defensive stance: 36 per cent plan to increase their allocations to equities, while 20 per cent anticipate a reduction in the size of their cash holdings.
