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Reaching for yield or resiliency? Explaining the shift in Canadian pension plan portfolios

Author

Listed:
  • Sébastien Betermier
  • Nicholas Byrne
  • Jean-Sébastien Fontaine
  • Hayden Ford
  • Jason Ho
  • Chelsea Mitchell

Abstract

“Reach for yield”—This is the commonly heard explanation for why pension plans shift their portfolios toward alternative assets. But we show that the new portfolios also hold more bonds, offer lower average returns and produce smaller and less volatile solvency deficits. These shifts are part of a broader strategy to reduce solvency risk.

Suggested Citation

  • Sébastien Betermier & Nicholas Byrne & Jean-Sébastien Fontaine & Hayden Ford & Jason Ho & Chelsea Mitchell, 2021. "Reaching for yield or resiliency? Explaining the shift in Canadian pension plan portfolios," Staff Analytical Notes 2021-20, Bank of Canada.
    • Handle: RePEc:bca:bocsan:21-20
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    File URL: https://www.bankofcanada.ca/2021/08/staff-analytical-note-2021-20/
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    More about this item

    Keywords

    Financial institutions; Financial markets; Financial system regulation and policies;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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