CANADA - Assets under management by Canadian pension funds topped C$1trn for the first time in 2006 mostly due to the recent strong performance of domestic and global equity markets.
The Greenwich Associates’ 2006 Canadian investment management research study revealed that strong investment returns helped Canadian pension plan sponsors maintain funding ratios at 97% for the past two years.
Although the results suggested Canadian pensions were in better financial health than those in other developed countries, the overall average encompassed pension plans with considerable variation in funding level.
Therefore this included several large public and corporate pension funds that were significantly under-funded.
But in spite of this, Greenwich Associates argued Canadian pension funds as a whole were actually in much better shape than average funding levels suggested.
Funding ratios among Canadian corporate pension plans averaged 99% in 2006 and public and provincial plans averaged 100% funded.
“It is only among the Canadian subsidiaries of US companies that average funding rates drop to 92%,” said Greenwich Associates consultant Lea Hansen.
In order to help generate much-needed investment returns, Canadian plan sponsors made several significant alterations to their asset allocations in 2006.
Total domestic equities fell to 22.5% of total assets in 2006 from 23.9% in 2005 and allocations to domestic bonds dropped to 31.4% from 32.0%.
Meanwhile, allocations to foreign stocks and bonds increased to 29.1% of total assets in 2006 from 25.6% in 2005. The most notable change to Canadian plan sponsors’ asset allocations in 2006 was this 3.5% increase in allocations to foreign securities.
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