More Canadian defined benefit (DB) pension plans are turning to alternative investments, according to a report from RBC Investor & Treasury Services.
A November 2020 survey of 122 DB plans across Canada found that 73% either held alternatives or were planning to add them within the next year.
Alts were particularly popular among large plans: 96% of DB plans with at least $5 billion in assets either already held or planned to add alternatives, the survey found.
According to the report, alternative investments — particularly real estate and infrastructure investments — were the second-most popular de-risking strategy for pensions, behind liability-driven investments.
Socially responsible investments (SRIs) are also becoming more popular with pension plans. Fifty-three per cent of respondents said SRIs were important to their strategy, up from 43% in 2019.
When it came to challenges, DB plans were most concerned about the current low-interest-rate environment (26%), followed by economic and geopolitical uncertainty (13%) and market volatility (13%).
Half of the pensions surveyed were fully funded in 2020, down from 66% in 2019. Large plans were most likely to be fully funded (62%), followed by small plans (55%) and mid-size plans (31%).
Pensions’ confidence in meeting their ongoing liabilities received a score of 4/5 — down from 4.4/5 in 2019.