CANADA - Two thirds of Canadian plan managers intend to abandon traditional balanced investment strategies in favour of "creative" solutions such as liability driven investing, a survey has found.
Watson Wyatt's 2006 Survey of Economic Expectations reported that market conditions and pension plan funding status had driven plan managers to balance risks with rewards more effectively, leading to an increased popularity of LDI and absolute-return investing.
Watson Wyatt’s investment consulting practice leader, Wendy Brodkin, said the investment paradigm was slowly shifting.
“Pension funds are embracing long bond portfolios and investment managers are designing products that harness more robust forms of returns,” she said. “Traditional portfolios have been dominated by the equity markets for too long and this is no longer acceptable in either risk or return space.
The survey also found that last year’s elimination of the foreign content limit was not expected to create any significant change in the way Canadian pension funds invest, with findings reporting that more than half of the portfolios will remain invested in Canada.
The report added that the foreign component of these plans would include a higher proportion of alternative investments.
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