Canadian defined benefit plans' funded status increased slightly in 2011 as low interest rates offset asset gains, according to a study from Greenwich Associates.
The average funding ratio of Canadian public DB plans was 91%, up from 88% in 2010, while Canadian corporate plans' funding ratio was unchanged at 90%, according to Greenwich's 2011 Canadian Investment Management Study.
Overall, Canadian plan assets increased 18% since 2009.
“Robust asset growth has been largely offset by increases in the valuation of liabilities brought on by low interest rates and demographic factors,” said Andrew McCollum, consultant at Greenwich, in a news release.
Canadian institutions also have relied far less on Canadian equities, with an average allocation of 15% in 2011, down from 27% in 2003.
The study also says that almost one-third of plan executives expect to “significantly decrease” allocations to Canadian equities over the next three years.
As part of their efforts to compensate for rising liabilities, 35% of Canadian DB plans have taken the first steps toward liability-driven investing, such as increase the duration of their fixed-income investments, despite historically low interest rates.
Despite the funding difficulties, there is a commitment to defined benefit plans, with 70% of Canadian plans open to new employees compared to only half of U.S. plans.
