This research authored by CEM Benchmarking Co-founder and Board Member Keith Ambachtsheer was published in the April 2021 edition of the Journal of Portfolio Management (JPM). To get a copy of the article’s reprint, fill out the form below.

ABSTRACT

This article documents the invention and rise of the Canadian Pension Model, starting with its intellectual foundations in the 1970s and 1980s and the creation in 1990s of the model’s prototype: the Ontario Teachers’ Pension Plan (OTPP). It follows OTPP’s evolution into a new, innovative type of pension organization, which other Canadian Pension Plans started to adopt. This evolution was the subject of a 2012 feature article in The Economist, which further raised the profile of what is increasingly called the Canadian pension model. This notoriety raises the logical question today of whether the adoption of the model is being matched by actual superior financial performance. This article presents evidence that is indeed the case. As t the future, wider adoption of the model would help generate the retirement income needed to sustain aging societies around the world.

KEY FINDINGS

• Pension organizations are not exempted from adopting good organization design and effective business practices
• Real-world application of these practices improves organizational performance
• Cost strongly affects relative performance; low-cost internal direct or co-investment private equity outperforms high-costs fund-of-funds private equity
• Challenging demographics and financial markets make this an especially good time for wide adoption of the Canadian pension model

TOPICS

Pension funds, developed markets, legal/regulatory/public policy, performance measurement