{"id":17230,"date":"2019-10-18T09:15:39","date_gmt":"2019-10-18T13:15:39","guid":{"rendered":"https:\/\/www.benefitscanada.com\/news\/canadian-db-plans-increasingly-focused-on-long-term-goals-monitoring-pension-risk-137553"},"modified":"2019-10-18T09:15:39","modified_gmt":"2019-10-18T13:15:39","slug":"canadian-db-plans-increasingly-focused-on-long-term-goals-monitoring-pension-risk","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2019\/10\/18\/canadian-db-plans-increasingly-focused-on-long-term-goals-monitoring-pension-risk\/","title":{"rendered":"Canadian DB plans increasingly focused on long-term goals, monitoring pension risk"},"content":{"rendered":"\n
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Staff<\/span> | October 18, 2019 <\/p>\n

Canadian defined benefit pension plans are increasingly focused on implementing long-term goals and mitigating asset risk amid a year of market volatility and shifting regulatory landscape, according to a new survey by Aon.<\/p>\n

Its biennial Canadian pension risk survey found 96 per cent of plan sponsors said they have a long-term strategy to reach their objectives, up from just 50 per cent a decade ago. More than half of respondents with a long-term plan identified sustainability \u2014 having an affordable level of contributions with low volatility \u2014 as their lead strategy in reaching long-term goals.<\/p>\n

A high proportion of plan sponsors said they\u2019ve already deployed or are likely to turn to delegated investment solutions to better manage asset risk. For instance, 43 per cent of respondents said they already outsource asset manager monitoring, while 31 per cent said they\u2019re very or somewhat likely to do so.<\/p>\n

Read: 2016 Top 40 Money Managers Report: The ins and outs of OCIO<\/a><\/strong><\/p>\n

The survey also found plan sponsors are moving away from traditional asset classes and towards alternatives, particularly foreign equities, real estate and illiquid alternatives like private equity and infrastructure.<\/p>\n

\u201cWhen it comes to investments, plan sponsors are embracing more active approaches to managing market risk,\u201d said Erwan Pirou, chief investment officer for Aon\u2019s delegated investment solutions in Canada, in a press release. \u201cWe\u2019re seeing more delegated management, global diversification and alternative assets in the mix, but sponsors will need to continue to be dynamic in their investment stance, while paying even closer attention to risk mitigation. Recent gains from equities and a fall in interest rates have pushed down future returns on many asset classes, meaning plan sponsors must focus on how to maximize risk-adjusted returns.\u201d<\/p>\n

The proportion of plan sponsors that aren\u2019t willing to hedge pension risks is declining. In particular, more survey respondents said they\u2019re open to hedging inflation risk, interest rate risk and currency risk.<\/p>\n

However, while survey respondents are still monitoring pension risk on an annual basis, they\u2019re tending to monitor asset values and performance more frequently, with 25 per cent saying they do so monthly or weekly. On funding levels, 46 per cent of plan sponsors said they monitor risk quarterly or more frequently.<\/p>\n

Read: Could solvency reform in Canada lead to a DB pension revival?<\/a><\/strong><\/p>\n

In response to provincial regulatory reform, 75 per cent of Quebec plan sponsors said they intend to make changes to their funding strategy and 73 per cent said the same about their investment strategy. In Ontario, where new regulations are expected soon, 44 per cent said they intend to make changes to their funding and investment strategies.<\/p>\n

\u201c2018 was the best of times and the worst of times for plan sponsors hoping to adjust their plan\u2019s risk profile, as median solvency whipsawed off decade highs in just months, forcing plan sponsors to be quick to react \u2014 or miss out,\u201d said William da Silva, Canadian practice director, retirement solutions at Aon.<\/p>\n

\u201cDe-risking remains an opportunity, but it will require thoughtful attention not just to long-term objectives, but also to risk monitoring and longevity issues, which so far seem not to be on many plan sponsors\u2019 radar. With the trend in funding rules shifting away from mark-to-market measures in favour of a long-term focus, plan sponsors should be careful to ensure that optimal decisions are made to balance the need for returns with management of cost volatility.\u201d<\/p>\n

Read: What options are available for de-risking DB pension plans?<\/a><\/strong><\/p>\n

Read the full article at BenefitsCanada.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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