Canada's Public Pension Plans well managed (Who knew?)

The Canada Pension Plan Investment Board released a statement,Canada's Top Ten pension funds help drive national prosperity, landmark study finds: 

Canada's ten largest public pension funds, dubbed "the Top Ten," provide Canadians with one of the strongest retirement income systems in the world and also contribute significantly to national prosperity, a new study concludes.

The landmark study commissioned by several members of the Top Ten and conducted by The Boston Consulting Group (BCG) provides, for the first time, data on the aggregate impact of these global organizations. The study is an in-depth examination of the economic impact of these pension funds to the end of fiscal 2011. The study concludes the Top Ten are a Canadian success story on the world stage.

The Top Ten represent a major cornerstone of the Canadian financial system and the economy at large. Over the last 10-15 years, the Top Ten have established the reputation of Canadian pension funds management as truly world-class. This reputation has opened doors around the world to investment opportunities that benefit the Canadians receiving pensions as well as their communities as a whole.

"This study is the first of its kind covering a group of financial institutions whose daily activities have an enormous impact on the retirement prospects of current and future generations of Canadians, and on the economy at large," said Kilian Berz, Senior Partner and Head of BCG Canada. "Several factors have enabled their success, with a core factor being a strong governance structure that allows the funds to operate as a business in the best interests of their members."

Among the key findings:

• The Top Ten pension funds are healthy, growing, and increasingly important to Canada as it faces challenging demographics and economics
• They have created a centre of excellence in Canada for managers of quality, large-scale investments
• They manage ~35% of Canada's retirement assets
• Their net assets grew by more than 100% in the previous eight years
• They have invested roughly $400 billion in Canada , including $100 billion in real estate, infrastructure and private equity
• They are strong proponents of good corporate governance practices, ultimately improving the efficiency and effectiveness of capital markets
• They comprise four of the top 20 global commercial real estate investors
• They also comprise four of the top 20 global investors in infrastructure assets
• They directly employ 5,000 professionals in the Canadian financial sector and an additional 5,000 employees in their real estate subsidiaries.

BCG's study focused on the ten largest public sector pension funds (ranked here by size of pension assets): The Canada Pension Plan Investment Board (CPPIB), The Caisse de dépôt et placement du Québec (Caisse), The Ontario Teachers' Pension Plan Board (OTPP), The British Columbia Investment Management Corporation (bcIMC), The Public Sector Pension Investment Board (PSP Investments), The Ontario Municipal Employees Retirement System (OMERS), The Healthcare of Ontario Pension Plan (HOOPP), The Alberta Investment Management Corp. (AIMCo), The Ontario Pension Board (OPB), and The OPSEU Pension Trust (OPTrust).

Global investment scale
The Top Ten funds managed, at the end of 2011*, $714 billion in pension funds - ~35% of Canada's total retirement assets. This total includes all public and private sector pension plans, RRSPs and other registered savings plans. This is broadly distributed among the ten and ranges from the $162 billion managed by the Canada Pension Plan Investment Board (CPPIB) to $14 billion by the OPSEU Pension Trust (OPTrust). Since BCG's study, which was conducted in the fall of 2012, the funds have continued to grow, with recent reporting periods indicating a total of roughly $775 billion in pension assets.

Growing Canadians' retirement investments
The Top Ten's $714 billion in pension assets under management in 2011 is an increase of more than 100% since 2003, over a period in which the world faced one of its most challenging economic periods. Two-thirds of the increase has been driven by solid investment returns of $240 billion vs. net inflows to the funds made by members and their employers of $125 billion .

"During a highly volatile period of time that encompassed the worst financial downturn since the Great Depression, the Top Ten have managed to more than double their pension assets, driven primarily through their investment activities," said Michael Block , the project lead from BCG. "This strong performance underscores the Top Ten's role as a cornerstone of Canada's well-regarded retirement income system."

The funds have focused on prudent investments offering attractive, risk-adjusted returns in public and private equities, infrastructure, real estate and bonds. The Top Ten are "major long-term investors in Canada ," with over $400 billion invested across various asset classes in Canada . BCG also found the Top Ten to have a broader impact on the Canadian financial sector with a $1.5 billion payroll and ability to attract and retain top Canadian talent.

Canadian pension funds are highly regarded around the world, having invested in, for example: one of the largest electricity transmission and distribution companies in the U.S.; the operator of seven UK airports including Heathrow; three Chilean water utilities; and one of the largest and most profitable insurance providers in South Korea ; among many, many others.