Canadian institutional investors focus on transparency, fee compression, ESG factors and more as they lead a global race for alternative investments
TORONTO, May 27, 2019 /CNW/ - Canadian institutional investors are seeking to further increase their overall allocations to alternative investment strategies, including real estate, private equity, infrastructure, private debt and hedge funds, according to a new study published today by CIBC Mellon.
The report, "Race for Assets: Canada vs. the World," found that among the various alternative sub-asset classes, real estate (42%) is most favoured among Canadian investors surveyed, followed by infrastructure (20%), private equity (18.7%), private debt / loans (17.9%), and hedge fund investments (1.4%). Private equity led the way in terms of satisfaction, with 47% of respondents saying performance exceeded expectations and the remainder finding the class performing as expected.
"Alternatives continue to gain momentum among Canada's institutional investors as they seek investments that can shelter their capital from short-term risks and market movements while also generating strong returns, though we are seeing Canadian investors becoming more particular about how they deploy their capital," said Jon Lofto, Director, Alternatives, CIBC Mellon. "Canadian investors are seeking increased transparency through the adoption of new technologies, which suggests a growing need for advanced analytics and big data to support the decision-making process as well as a desire to deliver returns while considering environmental, social and governance (ESG) factors."
Download the study at www.cibcmellon.com/raceforassetscanada
Key findings include:
- More than half of respondents (58%) expect allocations to alternatives among Canadian investors to increase over the coming 12 months – a higher portion than global peers.
- The most significant trends foreseen in the alternative asset space over the coming year are lower fees to investment managers (30%), the rise of technological innovation delivering increased transparency to investors (28%), and increased focus on ESG (22%).
- 48% of respondents indicate they will focus more on fund managers that take ESG factors into account over the next 12 months.
- While real estate currently accounts for the largest proportion of Canadian investors' alternatives exposure, it also had the lowest levels of satisfaction with performance – just 12% of investors found real estate performed ahead of expectations, while 30% said performance was worse than expected – paving the way for greater diversification across classes and regions.
- Canadian investors believe the main features distinguishing them from global investors include a higher priority on co-investment and direct investment (50%), greater tolerance of investments requiring long hold periods (40%), and a greater emphasis on the use of technology to lower costs (38%).
"The sustained growth in Canadian investors' allocations to alternative assets will continue to be supported by new products and strategies," said Ronald C. Landry, Head of Product and Canadian ETF Services, CIBC Mellon. "Accessing alternatives can be complex and challenging, and demand continues to grow for solutions that provide exposure to alternatives for investors across the spectrum of size and sophistication."
For its Race for Assets: Canada vs. the World paper, CIBC Mellon commissioned a survey of 50 Canadian institutional investors, including pension funds / trustees, investment fund / fund-of-fund managers, endowments and foundations, and insurance companies, for insight into the activities and investment strategies for allocating capital to alternative investments including, but not limited to, hedge funds, private equity, infrastructure and real estate. Respondents had a minimum of $330 million in assets under management, and a median of $3.2 billion.
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 March 31, 2019, CIBC Mellon had more than C$1.9 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 March 31, 2018 had US$34.5 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.
For more information, including CIBC Mellon's latest knowledge leadership on issues relevant to institutional investors active in Canada, visit www.cibcmellon.com.
Brent Merriman, Corporate Communications, CIBC Mellon, 416-643-5065, email@example.com