Data from 119 Canadian defined benefit plans revealed a small increase in the funding ratio among surveyed plans to 101% from 100% in 2018, according to a report released Wednesday by RBC Investor & Treasury Services.
The report, "Preparing for the Silver Tsunami," noted that when plan executives were asked what the top three challenges their plans face in the next 12 months, the most common answer was a low interest rate environment, with 20% responding, equal to last year's survey. Thirteen percent answered "Aligning future liabilities with assets," down from 21% last year, and 13% each also said market volatility and "other" were among the top three challenges.
When asked what the most effective derisking strategy is, 30% of survey respondents said liability-driven investing, down from 36% in last year's survey but still the top response. Eighteen percent said annuity buyouts, a new option for the survey this year, was the most effective, and 17% said shared risk (hybrid) plans, down from 20% last year.
This year's survey also shows 71% of plans currently hold alternatives or expect to add them, up from 70% in last year's survey. Among plans with more than $5 billion in assets, 90% currently either hold or plan to add alternatives, down from 96% last year; 90% of those with $1 billion to $5 billion either hold or plan to add them, up from 71% last year; and 51% of those with under $1 billion either hold or plan to add them, down from 59% last year.
Among the types of plans 94% of multiemployer plans either hold or plan to add alternatives, a new category for the survey, while 92% of public plans either hold or plan to add alternatives, up from 83% last year, and only 60% of private plans either hold or plan to add alternatives, down from 60% last year.