Assets under management by Canadian pension funds topped the $1 trillion mark for the first time in 2006 thanks in large part to the recent strong performance of domestic and global equity markets.
The results of Greenwich Associates’ 2006 Canadian Investment Management Research Study reveal that strong investment returns have helped Canadian pension plan sponsors maintain funding ratios at a relatively robust 97% for the past two years. While these results suggest that Canadian pensions are in better financial health than those in other developed countries, it is important to bear in mind that the overall average encompasses pension plans with considerable variation in funding level, including several large public and corporate pension funds that are significantly under-funded, the firm notes.
At the same time, it can be argued that Canadian pension funds as a whole are actually in much better shape than average funding levels would suggest. Funding ratios among Canadian corporate pension plans averaged 99% in 2006 and public and provincial plans averaged 100% funded. “It is only among the Canadian subsidiaries of U.S. companies that average funding rates drop to 92%,” says Greenwich Associates’ Toronto-based consultant Lea Hansen.