Methodology Part 1: The research is based on the top 1,000 pension plans in Canada, which have a total asset value of $1.12 trillion, as collected by Rogers Canadian Institutional Investment Network (CIIN). The data was collected from February to May of 2012. The data reflects an accounting year-end date of December 31, 2011. Individual results are not reported but shown in aggregate. Unless specifically indicated, numbers do not include CPPIB. Part 2: The Evolution of Risk is based on an online survey conducted in March 2012 with 303 representatives of Canadian pension and retirement plans. 2 Source: 2012 Canada s Pension Landscape Report, Canadian Institutional Investment Network, published in association with Rogers Publishing Ltd. and sponsored by Invesco Canada.
FIGURE 1 Canada s Pension Landscape Percentage of assets by province/territory Total ($M) % of Assets # of Funds % of Funds Avg. Fund Size ($M) Alberta $80,954 7.2% 69 6.9% $1,173.3 British Columbia $99,920 8.9% 113 11.3% $884.2 Manitoba $22,798 2.0% 44 4.4% $518.1 New Brunswick $12,299 1.1% 19 1.9% $647.3 Newfoundland and Labrador $7,482 0.7% 9 0.9% $831.4 Northwest Territories $329 0.0% 1 0.1% $329.0 Nova Scotia $20,868 1.9% 25 2.5% $834.7 Ontario $437,147 39.1% 493 49.3% $886.7 Prince Edward Island $1,618 0.1% 3 0.3% $539.4 Quebec $251,025 22.4% 163 16.3% $1,540.0 Saskatchewan $24,049 2.2% 28 2.8% $858.9 Yukon $127 0.0% 2 0.2% $63.4 Foreign* $6,937 0.6% 30 3.0% $231.2 CPPIB $152,814 13.7% 1 0.1% $152,814.0 Total $1,118,367 100% 1,000 100% *Foreign-owned companies with Canadian pensions 3 Note: Based on the top 1,000 pension plans in Canada as at December 31, 2011.
Industry Sector FIGURE 2 Pension Fund Assets by Industry Sector Public Administration $513 180 Finance, Insurance, Real Estate Transportation, Communications or Utility Manufacturing Agriculture, Forestry, Fisheries, Mining or Construction Healthcare $53 642 $48 335 $47 763 $137 299 $179 095 Education $35 247 Labour Organization $34 442 Wholesale/Retail $23 046 Business Services $22 368 Energy $13 411 Other $7 761 Media $2 778 $0 $150 000 $300 000 $450 000 $600 000 Plan Assets (mil) 4 Note: Assets quoted as at December 31, 2011.
20 17 18 18 19 Number of Plans 76 77 76 76 82 89 88 91 94 97 97 101 107 112 112 113 116 105 111 111 133 127 120 144 143 144 144 152 147 144 153 158 160 157 152 163 154 154 159 168 FIGURE 3 Number of Plans by Plan Range 2007 2008 2009 2010 2011 200 150 100 50 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 $250 to $499.9 mil $500 to $999.9 mil $1.0 to $9.9 bil Greater than $10 bil Plan Size Range 5
318 248 595 712 327 536 322 150 318 464 308 263 703 731 Active Members 791 257 834 186 856 379 3 228 104 3 346 293 3 426 645 3 455 572 3 447 953 FIGURE 4 Year-over-Year Active Members by Plan Type 2007 2008 2009 2010 2011 4 000 000 3 500 000 3 000 000 2 500 000 2 000 000 1 500 000 1 000 000 500 000 ` 0 DB CAP HYB Plan Type 6
Pension Assets (mil) FIGURE 5 Year-over-Year Pension Fund Assets by Plan Type DB CAP Hybrid CPPIB $1 000 000 $897 524 $831 942 $837 098 $800 000 $696 520 $752 922 $600 000 $400 000 $200 000 $119 437 $108 865 $123 939 $140 102 $152 814 $0 $39 020 $39 826 $43 254 $47 171 $48 761 $21 669 $15 984 $18 181 $17 606 $8 756 2007 2008 2009 2010 2011 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.
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% 2007 2008 2009 2010 2011 Year 8 Note: Figures shown for top 1,000 pension plans and DB above exclude CPPIB.
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% 2007 2008 2009 2010 2011 Year 9 Note: Other alternatives include hedge funds, managed futures, mortgages, business trusts, energy trusts, REITs, commodities, timber and oil & gas.
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.
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.
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
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
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%
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%
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