Hindsight will confirm that persistent political and economic ambiguity stemming from the financial crisis in 2008 has continued to be a bane for institutional investors. Yet, compared to Europe and the United States, Canada has performed relatively well, and it’s in no small part thanks to a unique set of variables: low interest rates combined with good regulation and available credit. (Throw in a bit of luck.)
But looking ahead, pundits similarly bet on a laundry list of competing variables (provincial finances, housing market and household debt, oil price differentials or the risk of a hard landing in China) that will ultimately result, they say, in slow growth (see Eric Léveillé’s take on macroeconomic trends).
The silver lining is that the economic healing continues and that the forecast is not for another recession call.
The ranking in our 2013 Top 40 Money Managers Report is borne out of this distinctive economic position and conveys a clear-cut message: a relentless bumpy ride has generated fresh thinking about asset allocation.
Consider a few trends that writer Caroline Cakebread teases out in her reportage.
- In the DB space, pension plan managers are more risk averse than they used to be, and managers are zeroing in on liabilities, rather than returns.
- In the DC space, plan members are becoming wise to investment volatility and are commanding strong returns based on de-risking options.
- Price has always been a benchmark, but a drift toward passive management makes it a more compelling low-cost feature on which to fiercely compete.
- Relationships between money managers and plan sponsors are becoming more collaborative.
Responding to the market call, money managers are changing their approach by carving out packaged investment solutions, rethinking fixed income portfolios and nurturing better relationships with plan sponsors by deconstructing what “risk” means and transferring active risk outside Canada.
What it all amounts to is the fastidious task of figuring out innovative ways to service institutional investments by simultaneously providing growth exposure and managing portfolio risk. In a word—making assets work harder.