CIBC Mellon's study reveals how pension plans adapt to rising pressures and explore consolidation trends
In a webinar hosted by Benefits and Pension Monitor, CIBC Mellon’s Darlene Claes-McKinnon and Michael Graham presented key findings from a study on Canadian pension plans, highlighting the challenges asset owners face today.
The webinar discussed how pension plans are grappling with issues ranging from rising interest rates and global geopolitical shocks to domestic financial pressures affecting institutional investments.
Claes-McKinnon emphasized that “every client in every segment is under pressure these days,” underscoring how organizations are evolving to meet their specific needs.
Michael Graham added that pension plans are adapting to the challenging market environment by finding innovative ways to transform despite the pressures.
They are actively reallocating assets to respond to both immediate and long-term risks, ensuring sufficient pension assets to meet fiduciary responsibilities.
The webinar also explored how societal trends, especially environmental, social, and governance (ESG) considerations, are influencing pension funds' decisions.
With growing pressure from diverse stakeholders, pension funds are weighing ESG factors more heavily in their investment strategies, though many remain cautious about public commitments, a trend dubbed ‘green hushing.’
Canadian pension funds continue to balance in-house management with outsourced investment services. CIBC Mellon's study revealed a trend toward increasing in-house asset management, though not at the pace anticipated.
56 percent of respondents reported expanding their relationships with outsourced managers, while 28 percent noted expanding their in-house teams.
Consolidation is another major trend, as 61 percent of pension plans are managing assets for other institutions. This move toward consolidation is seen as a way to achieve economies of scale and improve financial outcomes.
Larger pension plans also view consolidation as an opportunity for talent retention and development, particularly in a shrinking pension deficit environment.
The study further highlighted non-financial factors, such as the Truth and Reconciliation movement in Canada. A significant portion of pension plans (58 percent) are working to address Indigenous stakeholders, and 48 percent are enhancing services for Indigenous individuals and institutions.
Looking forward, Canadian pension plans face two main risks: technology challenges and broader economic concerns. Changing interest rates and the complexities of data management remain pressing issues.
Despite these challenges, Canadian asset owners are showing resilience, with a focus on adapting to market dynamics and maintaining their long-term goals.
