Thursday, April 28, 2016 Stamford, CT USA — With global markets in the grip of volatility, near-fully funded Canadian pension funds are turning their attention to liability management and shifting assets from domestic equities and bonds into areas such as international fixed income, private equity and real assets.

More than one-third of the Canadian public and corporate pension plan sponsors participating in the most recent Greenwich Associates Canadian Institutional Investors Study name liability management as one of the top issues facing their funds. That is a sharp increase from the previous year, when only a quarter of corporate funds and 8% of public funds cited liability management as a top concern.

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

Assets to Flow Out of Domestic Equity to International Fixed Income and Real Assets

Canadian institutional assets grew 9% from 2014–2015, following a 13% increase the prior year. That growth allowed corporate funds to maintain average funding levels of 97–98% and helped public funds improve from 91% in 2014 to 98% the prior year. Approximately 40% of pension funds plan to significantly decrease allocations to Canadian equity in the next three years. Institutions expect to increase allocations to international fixed income and real assets.

“Demand will remain high for strategies that can deliver attractive returns and/or diversify portfolios,” said Walmsley.  “This includes global and emerging market equities, bank loans and high yield, as well as infrastructure, real estate, and private equity.”

View the Report: Canadian Pension Funds Eye Liability Management, Portfolio Diversification