© Copyright 2006 Rogers Publishing Ltd. The following article first appeared in the January 2006 edition of BENEFITS CANADA magazine.
Fact Check: Changing Gears
What future allocations are in store for Canadian investors?
By Anna Sharratt

In the 2005 JPMorgan Asset Management Evolving Trends of Canadian Pension Plans Survey, defined benefit plan sponsors weighed in on their plan’s funding status, their post Foreign Property Rule investment stance, portfolio management strategies and currency management. The survey finds little navel gazing: sponsors are showing a preference for all things global.

Over 80% of plan sponsors believe the average non-domestic allocation of assets will be over 30% within three years.

When asked about their own plans, 18% of plan sponsors said they were planning to change their strategic asset allocation significantly now that the FPR is gone.

Sixty per cent of plan sponsors believe that Canadian investment managers will need to offer a greater range of non-domestic strategies to succeed.

Planned asset allocation changes for the near term include:
– a decrease in Canadian equities: 84%
– a decrease in Canadian fixed income: 42%
– an increase in international equities: 63%
– an increase in global equities: 53%

For those employers looking to change their approach to allocation management, 66% prefer some form of active allocation.

Of those not currently using derivatives,41% of sponsors say they would consider using them.

Of those plans which employ currency management(41%), the majority(56%)have implemented passive hedging strategies.

Source: 2005 JPMorgan Asset Management Evolving Trends of Canadian Pension Plans Survey of 104 of Canada’s 200 largest defined benefit pension plans. Telephone surveys were conducted from July 21 to Sept. 7, 2005.

Answers to the CAP Guidelines quiz in the December issue
1. False. If a CAP sponsor delegates to a service provider, the provider is responsible for following these guidelines and any applicable legal requirements.
2. False. CAP members are responsible for making investment decisions within the plan and for using the information and decision-making tools made available to assist them in making those decisions.
3. Review of the investment options should be conducted at least annually.
4. False. The investment objectives, investment strategies, investment risks, the manager(s), historical performance, and fees should be considered as well as whether the investment fund(s)selected provide CAP members with options that are diversified in their styles and objectives.
5. a,b,c,d,f
6. True. The funds must comply with the investment rules under applicable pension benefits standards.
7. Yes. A sponsor can restrict transfers, setting a maximum after which a fee can apply.
8. a, b and d: c is optional