Canadian pensions turn to infra for cover

Out of 235 institutions surveyed, more than one-third plan to increase their exposure to infrastructure over the next three years so as to manage liabilities, a study finds.

With liability management topping their list of priorities, Canadian funds are planning to shift away from domestic equities and bonds as they seek better rewards in private equity and real assets.

A study conducted by Connecticut-based Greenwich Associates found that 36 percent of the 235 institutional investors surveyed intend to increase their allocation to infrastructure within the next three years.

“Demand will remain high for strategies that can deliver attractive returns and/or diversify portfolios – such as global and emerging market equities, bank loans and high yield, as well as infrastructure, real estate and private equity,” the institutional equities research firm said in its report.

Increased market volatility has resulted in more than one-third of the Canadian public and corporate pension plans surveyed citing liability management as a top concern – a sharp increase from the 25 percent of corporate pension funds and 8 percent of public funds that did so the previous year.

“As pension funds approach fully funded status and market volatility levels remain high, plan sponsors are working with investment consultants and managers on plans to de-risk their funds,” Greenwich Associates consultant Davis Walmsley said.

In addition to pension funds, study participants also included endowments and foundations, all with at least C$100 million ($77.7 million; €68.2 million) in assets under management. The 235 institutions combined managed a total of C$1.8 trillion in 2015.

The findings echo those of another study released last week. US-based financial services research firm State Street surveyed 400 pension fund managers in 20 countries and found that nearly half plan to increase infrastructure exposure over the next three years as well.