In a bid to save millions of dollars in management fees, reduce operational inefficiencies, and boost investment returns, Brian Pallister, premier of Canada’s Manitoba province, made the case for regional pension plans to coordinate their investment strategies.
“Currently, we have multiple externally managed pools of funds valued at approximately $40 billion,” Pallister said during a press conference. “This relative silo mechanism that is used in terms of managing those pension assets creates some serious operational and cost inefficiencies.
“In many cases, there are multiple contracts with the same external managers for similar services that’s costing Manitoba pensioners millions of dollars each year in unnecessary costs, and it reduces returns on their pensions as well.”
Pallister also asserted that pensions are limited to contributing to smaller fund managers due to their lack of available capital in each respective pension’s portfolio to access high-quality, top-tier fund managers with larger minimum commitment thresholds.
“It also prevents pensions from leveraging their size to be able to make investments that are only available to larger funds, and that has to change,” he said.
Pallister clarified that he’s not calling for the pension funds themselves to merge, only that their operations be managed as a collective. More than $200 million in additional investment returns could potentially be garnered if his idea is fully realized, he added.
“By having pension funds shop together, we can get the flexibility and the efficiency of an appropriate asset mix, [and] we can take advantage of higher-quality transactions and yield negotiations as well,” Pallister said.
Actuaries haven’t specified exactly what changes in benefit payments Manitoba pensioners would experience as a result of the proposed changes, with the premier adding such a calculation would be “hard to speculate.”
Government officials from the premier’s team will be meeting with pension fund managers to discuss a way to move forward.