Canadian Pension Plans Increasing In-House Capabilities and Expanding Strategic Outsourcing, According to New Research from CIBC Mellon Français
TORONTO, March 1, 2021 /CNW/ - Many of Canada's sophisticated pension funds are at the forefront of a trend to shift asset management functions in-house, and working to navigate their growing requirements for investment operations and systems. Simultaneously, Canadian plans are also becoming increasingly strategic about selection of, allocations to and oversight over external managers, according to CIBC Mellon's survey of 50 leading Canadian pension funds entitled, "In Search of New Value: How Canadian Pension Funds are Preparing for a Post-COVID-19 Environment."
The second instalment of the research, "In-house capabilities are on the rise, but outsourcing remains vital" explores how Canadian pension funds anticipate an increasing proportion of their assets being managed in-house over the coming months and years. Significant cost savings are in focus: of the pension funds that have taken asset management in-house, two-thirds (66%) said they achieved savings as a result: 91% of those reporting savings achieved more than 10% savings, and 35% claim to have saved more than 20%. Furthermore, almost two-thirds (64%) of pension managers say one of the most important advantages of in-house management is a clear strategic alignment of the long-term objectives for the fund. Just over half (56%) believed that in-house teams have a better understanding of overall asset allocations.
"Canadian pension plan sponsors and fund managers remain relentless in their pursuit of stronger outcomes for stakeholders," said Alistair Almeida, Segment Lead Asset Owners. "Plan Members, Boards and Trustees demand sustainable returns, dependable operations and attentive service to plan members - all while reinforcing sharp focus on compliance and sound governance."
"Canadian pension funds are pursuing investment strategies founded on portfolios with diverse assets, including significant holdings of alternative assets," said Ian Fulton, Assistant Vice President, Institutional and Pension Accounting. "Whether building in-house capabilities or strengthening oversight over external manager programs, there is rising focus on the need for talent and technology needed to support growing sophistication."
"Canadian pension plan sponsors and pension fund managers are looking across the board at the in-house versus outsourcing debate - from operations to technology to investment management," said Darcie James Maxwell, Lead Architect, Client Data Solutions. "Even the largest plans increasingly recognize that they lack the scale and resources to be the very best at everything for which they are ultimately accountable – particularly with respect to rising technology and data challenges. The most sophisticated players are looking to manage data as a valuable asset, which means leveraging strong and specialized providers for support as they focus their time and resources on the areas where they can drive greatest value for their stakeholders."
Download the Chapter 2 of the study at www.cibcmellon.com/insearchofnewvalue clients can also contact their CIBC Mellon relationship manager to learn more or arrange a detailed discussion of the findings.
Additional findings include:
- While 84% of funds say they will outsource at least some of their regulatory reporting work over the next 12 months, this is also an area prioritized for in-house investment. Some 69% and 59% of pension funds respectively report they will invest in talent and technology in this regard.
- It is notable that 60% of respondents point to in-house technology capabilities as standing in the way of in-house asset management. That bar is only likely to move higher as tools and technologies such as data analytics, data science, machine learning and artificial intelligence become more embedded in the asset management sector.
- 86% of pension funds say they intend to drive a harder bargain on investment fees over the next 12 months. While in-sourcing asset management often secures considerable savings, many funds are also keen to bring down costs on outsourced contracts. The demand for greater transparency – highlighted by 80% of pension funds – is part of the same strategy.
Methodology
The survey of 50 leading Canadian pension managers was completed in 2020. Half of respondents had between C$600m and $1.2B under management, half had more than $1.2B under management, and the average AUM in the study was $31B. Respondents were located across Canada; 26% of respondents were private plans, and 74% public.
About CIBC Mellon
CIBC Mellon is a Canadian company exclusively focused on the investment servicing needs of Canadian institutional investors and international institutional investors into Canada. Founded in 1996, CIBC Mellon is 50-50 jointly owned by The Bank of New York Mellon (BNY Mellon) and Canadian Imperial Bank of Commerce (CIBC). CIBC Mellon's investment servicing solutions for institutions and corporations are provided in close collaboration with our parent companies, and include custody, multicurrency accounting, fund administration, recordkeeping, pension services, exchange-traded fund services, securities lending services, foreign exchange processing and settlement, and treasury services. As at December 31, 2020, CIBC Mellon had more than C$2.1 trillion of assets under administration on behalf of banks, pension funds, investment funds, corporations, governments, insurance companies, foreign insurance trusts, foundations and global financial institutions whose clients invest in Canada. CIBC Mellon is part of the BNY Mellon network, which as at December 31, 2020 had US$41.1 trillion in assets under custody and / or administration. CIBC Mellon is a licensed user of the CIBC trade-mark and certain BNY Mellon trade-marks, is the corporate brand of CIBC Mellon Global Securities Services Company and CIBC Mellon Trust Company, and may be used as a generic term to refer to either or both companies.
For more information, including CIBC Mellon's latest knowledge leadership on issues relevant to institutional investors active in Canada, visit www.cibcmellon.com.
Media Contact
Brent Merriman
Corporate Communications
CIBC Mellon
416-643-5065
[email protected]
SOURCE CIBC Mellon
Media Contact: Brent Merriman, Corporate Communications, CIBC Mellon, 416-643-5065, [email protected]
Share this article