Province's premier wants to make funds better shoppers to cut fees and unlock extra value
Manitoba has multiple externally managed pools of funds, mostly pension funds, valued at around $40 billion.
But these funds could provide better returns for pensioners and unlock around $200 million or more in annual returns, if they worked together to be better shoppers.
That’s the view of Premier Brian Pallister who said Monday that if funds were to buy their investment management services collectively, it would lead to reduced fees and greater pension security for the province’s pensioners.
“By centralizing the funds’ investment management, we can achieve economies of scale, leading to improved financial gains for pension plans, while leaving more money on the tables of pensioners and workers,” said Pallister.
Because the province’s pension funds generally operate in siloes, they have higher costs resulting in lower yields, added Pallister, who is challenging the funds to collaborate.
He will meet with fund managers in the coming weeks and funds will be expected to provide a joint recommendation on how to proceed by March 2020.
“We have a significant opportunity for pension plans to reduce the fees they are paying today to managers in places like Toronto and New York. By reducing these costs, getting better returns and having access to new types of investments only available larger pension plans, we will improve the sustainability of these plans,” said Pallister. “This will also reduce the need for higher contribution rates in the future.”
