Graphic: Canadian innovation
Canadian public pension plans took a different road than their global counterparts beginning in the late 1990s. Their strategy, now known as the Canadian model, focuses on internal management, direct private investment and broad infrastructure allocations. Separating operations from politics has been a boon for management, allowing the plans to operate unrestricted and deploy capital where they see opportunity.
New directions: Plans began to see the value in infrastructure and real estate investments near the end of 2010. At the end of 2016, one-fifth of plan assets were invested in the two asset classes, on average.*
Going private: A large part of the Canadian model is private investment. The Canada Pension Plan has grown its private investment portfolio to just less than half of total plan assets.
Higher costs: The added in-house capabilities and infrastructure come at a cost. Canadian plans typically have higher operating costs than their U.S. counterparts.
Payoff: The added costs appear to be paying off, as the three largest Canadian plans outperformed both CalSTRS and CalPERS over the long term. Since many of the Canadian plans’ private investments are new, outsized returns should be expected as they mature.
*Canada’s three largest plans were used as a proxy for the Canadian model. **No data for 10-year returns. Sources: CPP Investment Board; Ontario Teachers’ Pension Plan; Caisse de Dépôt et Placement du Québec; CalPERS; CalSTRS
Compiled and designed by Charles McGrath and Gregg A. Runburg
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