Canada s Pension Landscape Percentage of assets by province/territory

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Hortense Hunter
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2 Methodology Part 1: The research is based on the top 1,000 pension plans in Canada, which have a total asset value of $1.12 trillion, as collected by Rogers Canadian Institutional Investment Network (CIIN). The data was collected from February to May of The data reflects an accounting year-end date of December 31, Individual results are not reported but shown in aggregate. Unless specifically indicated, numbers do not include CPPIB. Part 2: The Evolution of Risk is based on an online survey conducted in March 2012 with 303 representatives of Canadian pension and retirement plans. 2 Source: 2012 Canada s Pension Landscape Report, Canadian Institutional Investment Network, published in association with Rogers Publishing Ltd. and sponsored by Invesco Canada.

FIGURE 1 Canada s Pension Landscape Percentage of assets by province/territory Total ($M) % of Assets # of Funds % of Funds Avg. Fund Size ($M) Alberta $80,954 7.2% 69 6.9% $1,173.

3 FIGURE 1 Canada s Pension Landscape Percentage of assets by province/territory Total ($M) % of Assets # of Funds % of Funds Avg. Fund Size ($M) Alberta $80, % % $1,173.3 British Columbia $99, % % $884.2 Manitoba $22, % % $518.1 New Brunswick $12, % % $647.3 Newfoundland and Labrador $7, % 9 0.9% $831.4 Northwest Territories $ % 1 0.1% $329.0 Nova Scotia $20, % % $834.7 Ontario $437, % % $886.7 Prince Edward Island $1, % 3 0.3% $539.4 Quebec $251, % % $1,540.0 Saskatchewan $24, % % $858.9 Yukon $ % 2 0.2% $63.4 Foreign* $6, % % $231.2 CPPIB $152, % 1 0.1% $152,814.0 Total $1,118, % 1, % *Foreign-owned companies with Canadian pensions 3 Note: Based on the top 1,000 pension plans in Canada as at December 31, 2011.

4 Industry Sector FIGURE 2 Pension Fund Assets by Industry Sector Public Administration $ Finance, Insurance, Real Estate Transportation, Communications or Utility Manufacturing Agriculture, Forestry, Fisheries, Mining or Construction Healthcare $ $ $ $ $ Education $ Labour Organization $ Wholesale/Retail $ Business Services $ Energy $ Other $7 761 Media $2 778 $0 $ $ $ $ Plan Assets (mil) 4 Note: Assets quoted as at December 31, 2011.

5 Number of Plans FIGURE 3 Number of Plans by Plan Range $5.0 to $14.9 mil $15.0 to $24.9 mil $25.0 to $49.9 mil $50.0 to $99.9 mil $100 to $249.9 mil $250 to $499.9 mil $500 to $999.9 mil $1.0 to $9.9 bil Greater than $10 bil Plan Size Range 5

6 Active Members FIGURE 4 Year-over-Year Active Members by Plan Type ` 0 DB CAP HYB Plan Type 6

7 Pension Assets (mil) FIGURE 5 Year-over-Year Pension Fund Assets by Plan Type DB CAP Hybrid CPPIB $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $0 $ $ $ $ $ $ $ $ $ $ Year 7 Note: In 2010, $6.85 billion pension assets were reported as hybrid plans (primarily three pension plans). However, in 2011, they were separated into DB and DC plans. The number of DB plans remained relatively the same at 741, while CAP plans increased from 516 to 685.

8 Growth/Return FIGURE 6 Pension Fund Growth vs. Benchmark Indices Top 1,000 Pension Plans DB S&P/TSX Composite Index DEX Universe Bond Index MSCI World Index (Net) 40,0% 35,1% 30,0% 20,0% 17,6% 10,0% 0,0% -10,0% 9,8% 3,7% 1,4% 0,2% -7,5% 10,4% 8,3% 8,1% 6,4% 5,4% -15,6% 11,2% 10,6% 6,7% 5,9% 9,7% 7,2% 6,3% -3,2% -8,7% -20,0% -16,3% -25,8% -30,0% -40,0% -33,0% Year 8 Note: Figures shown for top 1,000 pension plans and DB above exclude CPPIB.

9 Asset Allocation FIGURE 7 Allocations to Key Asset Classes Fixed Income 40,0% Canadian Equity EAFE Equity U.S. Equity Real Estate Equity Global Equity Other Alternatives Private Equity Infrastructure 35,0% 30,0% 29,4% 31,3% 32,5% 33,3% 33,6% 25,0% 20,0% 18,6% 17,9% 17,9% 17,8% + 16,9% 15,0% 10,0% 5,0% 0,0% 13,2% 13,4% 15,3% 10,7% 10,8% 10,1% 8,5% 9,9% 8,3% 8,5% 8,9% 6,9% 6,9% 6,2% 6,5% 6,8% 6,4% 6,0% 5,5% 4,8% 6,8% 5,9% 6,0% 4,0% 3,9% 3,9% 5,9% 4,6% 4,2% 2,9% 4.2% 3,9% 4,2% 3,2% 3,4% Year 9 Note: Other alternatives include hedge funds, managed futures, mortgages, business trusts, energy trusts, REITs, commodities, timber and oil & gas.

10 1,3% 5,4% 1,2% 3,6% 1,0% 7,0% 4,9% 3,8% 4,1% 6,7% 3,5% 4,0% 5,8% 3,9% 5,8% 3,1% 1,5% -4,4% 3,2% 2,7% 2,0% 18,6% 14,0% 16,1% 13,3% 10,8% 14,2% 12,0% Asset Allocation 21,4% 20,4% 26,8% 24,8% 27,0% 30,7% 30,6% 33,8% 33,9% 36,3% 35,5% 32,8% 44,8% 42,7% 46,2% 45,5% 42,6% 50,4% 51,6% 52,7% 50,9% 49,6% FIGURE 8 Asset Allocation by Plan Range: Equity Fixed Income Cash/GIC Alternatives Other 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% -10,0% Less than$5.0 mil $5.0 to $14.9mil $15.0 to $24.9 mil $25.0 to $49.9 mil $50.0 to $99.9 mil $100 to $249.9 mil Plan Range $250 to $499.9 mil $500 to $999.9 mil $1.0 to $9.9 bil Greater than $10 bil 10 Note: Assets quoted as at December 31, 2011.

11 Externally Managed FIGURE 9 Externally Managed Assets by Plan Size 120% 100% 99% 100% 99% 99% 97% 97% 96% 86% 80% 60% 57% 40% 20% 0% $5.0 to $14.9 mil $15.0 to $24.9 mil $25.0 to $49.9 mil $50.0 to $99.9 mil $100 to $249.9 mil Plan Range (mil) $250 to $499.9 mil $500 to $999.9 mil $1.0 to $9.9 bil Greater than $10 bil 11 Note: Assets quoted as at December 31, 2011.

12 FIGURE 10 Do you agree or disagree with the following statement? Strongly Agree Somewhat Agree Total The risks or threats facing our group retirement plan/ pension plan have changed during the last 5 years (all plans) 36% 48% 84% We would like to de-risk our pension plan, but need to accept some risk in order to achieve the return we require to obtain/maintain our funding status (DB only) 23% 54% 77% We are in the process of de-risking our pension plan (DB only) 18% 56% 74% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 12

13 FIGURE 11 DB plans open to new hires? FIGURE 12 Likelihood of DB plans to close in favour of DC plans? No Answer Very Likely 3% 4% 12% Frozen 24% Closed 63% Open 43% Not At All Likely 13% Somewhat Likely 37% Not Very Likely 13

14 FIGURE 13 Top 3 Risks in DB Sustainability Total Mention Ranked 1st Market volatility Interest rates Current funded status of the plan Economic uncertainty Changing accounting rules (i.e., FASB) Fees/Investment costs Inflation Knowledge level of board and trustees re. investments/ldi, etc. Currency Other 1% 2% 3% 1% 1% 0% 5% 4% 8% 11% 11% 16% 15% 26% 26% 27% 35% 0% 10% 20% 30% 40% 50% 60% 70% 80% 59% 64% 76% Top 3 Risks in DC/RRSP Sustainability Total Mention Ranked 1st 14 Members understanding of plan Members having inadequate retirement savings Poor returns on investment options in plan Member apathy Fiduciary risk Costs/Fees Litigation risk Inappropriate default options Other 4% 6% 9% 3% 4% 1% 1% 0% 11% 0% 10% 20% 30% 40% 50% 60% 70% 80% 18% 22% 24% 29% 28% 39% 53% 69% 76%

15 FIGURE 14 DB Current vs. Past Strategy Currently Using Used 5 Years Ago 63% Increase employer contributions 15% 61% Different investment strategy 16% 42% Increase employee contributions 10% 37% Improve internal efficiencies 16% 19% Outsource plan management 16% Other 8% 1% 0% 10% 20% 30% 40% 50% 60% 70% 15 DC Current vs. Past Strategy Currently Using Used 5 Years Ago Improve/enhance member communication and education strategy Change investment options Offer plan members access to financial advisors Introduce target date funds Change default option Change contribution rates Outsource pension plan administration Change settlement options for plan members at retirement Other 6% 3% 2% 9% 12% 11% 11% 11% 13% 19% 21% 17% 29% 32% 37% 0% 10% 20% 30% 40% 50% 60% 70% 80% 45% 57% 72%

16 Disclaimer Published in association with Rogers Publishing Ltd. Business and Professional Publishing Group One Mount Pleasant Road, 7 th Floor Toronto, Ontario M4Y 2Y5 For additional information, please contact Invesco: susan.hunt@invesco.com or institutional.invesco.ca * 16 * Invesco and all associated trademarks are trademarks of Invesco Holding Company Limited, used under licence. Invesco Canada Ltd., 2012

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