Canada's retirement powerhouses are rethinking the game plan
Canada’s pension plans have provided retirement security for millions and been some of the shining lights in investment management for many years, but the game is changing.
Faced with unprecedented challenges, the portfolio construction and investment strategies of the Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan may require changes for the years ahead.
“What’s worked famously well for the last 35 years may not work so well for the next five to 10,” Jo Taylor, chief executive officer of the Ontario Teachers’ Pension Plan, told Bloomberg in Toronto.
Ontario Teachers blamed several matters for its disappointing overall net return in 2023 (1.9% compared to its 8.7% benchmark) but while multiple asset classes delivered less than expected, real assets accounted for a significant shortfall with a negative return (-4.1%) well below its +5.3%.
Bloomberg data shows that real estate are losing bets for the top pension plans, which have around $170 billion invested in the asset class. Looking at the stats from the most recent fiscal year reports available (with the caveat that those years may not be the same for all funds), the negative returns speak for themselves:
- CPPIB -5%
- CDPQ -6%
- OTPP -6%
- PSP -16%
- OMERS -7%
These returns have resulted in losses of between $19.4 billion for OMERS and $50.6 billion for CPPIB.
BNN Bloomberg reported Monday that pension plans are reevaluating their relationships with real estate which may involved reducing exposure, combining holdings with others, or forming third-party partnerships.
The report noted that Ontario Municipal Employees Retirement System is holding steady with its real estate strategy, having already closely integrated fund with its real estate subsidiary Oxford Properties.
