The Canadian Pension Fund Model: A Quantitative Portrait

forthcoming in the Journal of Portfolio Management

Posted: 4 Aug 2020 Last revised: 7 Dec 2021

See all articles by Alexander Beath

Alexander Beath

CEM Benchmarking Inc.

Sebastien Betermier

McGill University - Desautels Faculty of Management

Chris Flynn

CEM Benchmarking Inc.

Quentin Spehner

CEM Benchmarking Inc.

Date Written: March 3, 2021

Abstract

This paper presents a quantitative portrait of the Canadian pension fund model. The authors show that, between 2004 and 2018, Canadian pension funds outperformed their international peers both in terms of asset performance and liability hedging. A central factor driving this success is the implementation of a three-pillar business model that consists of i) managing assets in-house to reduce costs, ii) redeploying resources to internal investment teams for each asset class, and iii) channeling capital toward growth assets that increase portfolio efficiency and hedge liability risks. This model works best for funds whose pension liabilities are indexed to inflation.

Keywords: Institutional fund management, retirement

JEL Classification: G23

Suggested Citation

Beath, Alexander and Betermier, Sebastien and Flynn, Chris and Spehner, Quentin, The Canadian Pension Fund Model: A Quantitative Portrait (March 3, 2021). forthcoming in the Journal of Portfolio Management, Available at SSRN: https://ssrn.com/abstract=3661876 or http://dx.doi.org/10.2139/ssrn.3661876

Alexander Beath

CEM Benchmarking Inc. ( email )

80 Richmond Street West, Suite 1300
Toronto ON, M5H 2A4
Canada

Sebastien Betermier (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

Chris Flynn

CEM Benchmarking Inc. ( email )

80 Richmond Street West, Suite 1300
Toronto ON, M5H 2A4
Canada

Quentin Spehner

CEM Benchmarking Inc. ( email )

372 Bay St, Suite 1000
Toronto ON, M5H 2W9
Canada

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