Almost half (48%) of defined benefit plan sponsors plan to increase their allocation to alternative investments as they seek long-term returns less correlated to public equity markets, finds RBC Investor Services.
Further, this figure jumps to 88% for plan sponsors that have over $1 billion in assets.
“Canadian pension plans are increasingly looking to the alternatives asset class for long-term assets that are better matched to their liabilities, and less tied to the swings of the stock markets,” says Scott MacDonald, head, pensions, insurance, and sovereign wealth strategy, RBC Investor Services.
He adds, “With many governments seeking investors to renew ailing infrastructures, there are deals to be made and pension plans are looking to gain exposure to these assets in their portfolios.”
These alternative investments can include real estate, infrastructure assets and private investments.
In fact, for those already holding alternatives, real estate is the preferred choice— 45% plan to add this asset and 34% plan to invest in infrastructure.
On another note, 61% will not stop offering defined benefit (DB) plans. However, 39% have either already closed their DB plans to new members and opened defined contribution plans (27%), or plan to do so within the next two to five years (12%).
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