Pension funds flock to private equity

Canadian pension funds are adjusting their asset allocations to better meet their long-term needs in the wake of Covid-19, finds a poll from CIBC Mellon released on Wednesday.

Most of the 50 pensions funds that completed the survey last year planned to alter their portfolio mixes.

For example, 90% of respondents said they intended to increase allocations to private equity over the next year.

And almost half of the funds (42%) expected to raise their exposures to real estate.

As far as reducing exposures, 86% of the funds cited infrastructure, saying they expected to reduce their exposures over the next 12 to 24 months.

Fixed-income allocations were also top of mind, with almost nine in 10 pension funds (86%) expecting to invest more in fixed-income assets in the short term.

However, not all funds were defensive: 36% planned to increase their allocations to equities — though almost twice as many as planned to trim such allocations — and 20% anticipated a reduction in the size of their cash holdings.

The poll also found several pension funds were shifting asset management functions in-house, in particular for real estate and equities.

At the same time, the funds were becoming “increasingly strategic” about the selection and oversight of, and allocations to, external managers, a release said.

“Many Canadian pension funds take a nuanced approach to asset management,” said Alistair Almeida, segment lead asset owners, CIBC Mellon, in the release. “Where appropriate, they operate with in-house teams and this appears to be increasing. Elsewhere, they are pursuing partnerships and collaborations, as well as full-scale outsourcing arrangements.

“There is no one-size-fits-all arrangement,” Almeida said.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.