Alternative investments emerge as popular de-risking strategy

RBC Investor & Treasury Services’ fourth annual survey shares the perspectives of Canadian defined benefit pension plans from across the country

TORONTO, March 3, 2021 — An RBC Investor & Treasury Services survey conducted in November 2020 has revealed that Canadian defined benefit pension plans are continuing to explore various types of alternative investments to provide higher risk-adjusted returns over the longer term and enhance the sustainability of their plans.

The annual survey, which includes the aggregate responses of 122 pension plans across Canada, cites the use of alternative investments – in particular, real estate and infrastructure – as an effective de-risking strategy, second only to liability-driven investments (LDIs). As of November 2020, 96% of large plans (characterized as those with over $5 billion in assets) and 73% of plans overall either held alternatives or intended to add them within the next 12 months.

“We’re continuing to see this gradual shift towards alternatives, as well as a noticeable decline in fully-funded plans (50% in 2020 versus 66% in 2019) despite the favourable net returns in 2020,” stated Niki Zaphiratos, Managing Director and Head of Asset Owners, Global Client Coverage Canada, RBC I&TS. “While confidence remains high, some of the main short-term challenges across all plans are the low interest rate environment, economic and geopolitical uncertainty, coupled with market volatility.”

Other key takeaways from the survey

  • The confidence of Canadian pension plans received an overall score of 4.0/5 in 2020 (versus 4.4 in 2019 and 3.8 in 2018).
  • Pension plans identified “re-assessment of asset management strategy” and “higher member and/or employer contributions” as their top responses to COVID-19 (selected by 29% and 26% of respondents respectively).
  • Liability-driven investments (LDIs) were considered the most effective de-risking strategy but continued their decline from a high of 39% of pension plans in 2017 to 26% in 2020.
  • 53% of respondents perceived socially responsible investments (SRIs) to be important to their overall strategy, up from 43% in 2019.


The full report can be viewed here.

About RBC Investor & Treasury Services

RBC Investor & Treasury Services (RBC I&TS) is a specialist provider of asset services, custody, payments and treasury and market services for financial and other institutional investors worldwide, with over 4,500 employees in 16 countries across North America, Europe and Asia. We deliver services which safeguard client assets, underpinned by client-centric digital solutions which continue to be enhanced and evolved in line with our clients’ changing needs. Trusted with CAD 4.5 trillion in client assets under administration, RBC I&TS is a financially strong partner with among the highest credit ratings globally.

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