Canada’s pension plans enjoy a well-deserved global reputation for strong management and resilient performance, but they are not immune to shocks in the markets in which they operate. The COVID-19 pandemic – a true Black Swan1 event – has been testing pension plans and their asset managers, prompting significant volatility in financial markets and reshaping the global economy.
This is the backdrop against which we surveyed 50 of Canada’s leading pension plans, seeking insights into how they have coped with the crisis, the challenges and opportunities that now lie ahead, and how they are positioning themselves accordingly. In this report, we present the findings of this research.
The good news is that Canada’s pension plans are well-governed, maintaining diversified portfolios that deliver returns closely aligned to their long-term liabilities. This far-sighted approach has provided some protection from the disruption caused by COVID-19; most plans have the time and the space they need to work through the immediate impacts of the pandemic on short-term returns.
Nevertheless, the investment outlook remains clouded, not only because of the uncertainties around the ongoing course of the pandemic, but also the direction of the incoming Biden administration in the U.S.; evolving pandemic post-Brexit questions in the U.K. and Europe; and geopolitical tensions concerning China’s relationship with the rest of the world. At home, meanwhile, Canada’s pension plans are still dealing with some familiar challenges, including an aging population with a longer life expectancy, finite resources and more complex regulations. All of these pressures, moreover, will feel tougher in the context of uncertain or uneven global economic prospects across sectors and geographies.
In this difficult environment, pension plan leaders are now thinking hard about what is needed to maintain confidence in their ability to meet their long-term obligations – above all, to fund pension payments to their members. Some repositioning will be required.
In the first chapter of our report, we present our findings with respect to how pension funds are adapting their investment strategies. Over the months ahead, we will invite you to join us as we explore other dimensions of Canada’s innovative pension and investment landscape.
View Chapter One.
This article is provided for general information purposes only and CIBC Mellon and its affiliates make no representations or warranties as to its accuracy or completeness, nor do any of them take any responsibility for third parties to which reference may be made. This article should not be regarded as legal, accounting, investment, financial or other professional advice nor is it intended for such use.
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.
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