National
Pension Hub

We strive to offer local pension design insights as well as globally-relevant pension investment and governance research to establish Canada as a source for leading pension research.

National Pension Hub Publications


The purpose of the National Pension Hub (NPH) is to provide a sustainable pipeline of independent and objective pension research that, among other things, will lead to innovative solutions to pension design, governance and investment challenges.


 


Green Urban Development: The Impact Investment Strategy of Canadian Pension Funds

Large Canadian pension funds are known to invest heavily in real assets, which include real estate, infrastructure and land. In this paper, we take the analysis down to the asset level and study how these funds create value and manage risks in the private real estate market.

A Comparison of Pension Fund Regulation in Canada and the Netherlands

This study compares two pension supervisory frameworks (the Dutch and Canadian framework) and examines which short-term and long-term regulations for occupational pension funds are best at maintaining a healthy financial situation for the fund and provides the best results for participants in terms of pension benefits.

Forced Retirement Risk & Portfolio Choice

Forced Retirement Risk & Portfolio Choice Guodong Chen, New York University at Shanghai Minjoon Lee, Carleton University Tong-yob Nam, U.S. Department of the Treasury Download the full paper – PDF Version Introduction Current literature on the effect of labor income on portfolio choice overlooks that workers face a risk of being forced to retire before… View Article

Fintech and the Retirement Savings System

GRI Research Associate Sally Shen co-authored the paper Fintech and the Retirement Savings System which was published by the Society of Actuaries in January 2021.

Risk Sharing Pension Plans

Risk Sharing Pension Plans Mary Hardy, University of Waterloo David Saunders, University of Waterloo Xiaobai Zhu, Southwestern University of Finance and Economics Download the full paper – PDF Version This project adapts results from theoretical, stylized work on pension design, to explore a form of Target Benefit (TB) plan that allows for structured, transparent intergenerational… View Article

Can Estimated Risk and Time Preferences Explain Real-life Financial Choices?

This project is the first to relate jointly estimated risk and (present-biased) time preferences to actual financial decision making by means of a (non-linear) life-cycle model. On average, pension fund participants show present-biased behavior. Retirees are less present-biased than active participants.

Preferences, Disposition Effect and COVID-19

This research measures preferences and trading behavior during the emergence of the COVID-19 crisis. Marike and her coauthors find that in a crisis, individual investor behaviour becomes more impatient and risk seeking.

Forced Retirement Risk and Portfolio Choice

In this interim report on forced retirement risk and the link to investment portfolios, Minjoon Lee and his coauthors analyze the latest Canadian data and find that the correlation between stock returns and the chance of involuntary job separation is much stronger during the coronavirus crisis.

The Canadian Pension Fund Model: A Quantitative Portrait

Between 2004 and 2018, Canadian pension funds outperformed their international peers both in terms of asset performance and liability hedging. This project shows a central factor driving this success is the implementation of a three-pillar business model that consists of i) managing assets in-house to reduce costs, ii) redeploying resources to investment teams for each asset class, and iii) channeling capital toward growth assets that increase portfolio efficiency and hedge liability risks.

Risk Shifting Versus Risk Management: Canadian Pension Plan Liability Discount Rates

The design of a pension plan should reflect preferences of the stake holders and be resilient to economic, financial and demographic stresses. Observers have often assumed that moral hazard plays a role in pension fund asset allocation. However, based on our empirical findings, it is fair to highlight that, in Canada, discount rates are a reflection of risk preferences, rather than of regulatory structure or political incentives.

Forced Retirement Risk and Portfolio Choice

Older workers in Canada and the U.S. face a significant risk of being forced to retire before their planned retirement ages. In this project, we examine the implications of this risk on late-in-life portfolio management.

Canadians’ Preparation for Retirement (CPR)

In this report, we present and describe a comprehensive stochastic retirement income calculator (Canadians’ Preparedness for Retirement, or CPR) that will be made available to the general public in the near future.

Transition from Defined Benefit to Target Benefit

Transition from Defined Benefit to Target Benefit Industry Report Mary Hardy, David Saunders, and Xiaobai Zhu Department of Statistics and Actuarial Science, University of Waterloo Download the Industry Report Highlights This article is a summary of the paper by the same authors, titled “Long and short term optimal transition from a defined benefit to a… View Article

The Other Longevity Risk

Pension plan sponsors are aware of one longevity risk in their plans – the risk that plan members live longer than assumed. There are steps that they have taken to mitigate this risk. Pension liabilities have been valued anticipating future increases in longevity, and some longevity exposure has been transferred to insurance companies through annuity purchases or pension “buy-ins”.

Leverage to Meet the Pension Promise

This article discusses use of leverage in the context of defined benefit pension plan investment. It defines the term leverage, discusses how leverage creates value using a simple one-period model and stylized market assumptions, examines risks associated with using leverage and reviews methods and best practices to mitigate and manage these risks.

Diversification risks of Canadian hedge fund strategies

Which Canadian hedge fund strategies minimizes downside risk during traditional market declines? Which strategies are most correlated with traditional broad market indices and to other strategies? These are typical questions that form the basis of any due diligence process of hedge funds and which this article addresses. We examine the potential diversification risks to the selection of hedge fund strategies.

Discount Rate Regulation for Canadian Private Defined Benefit Pension Plans

This paper proposes to use an ultimate forward rate (UFR) method to extrapolate the corporate yield. This is a subjective method that extrapolates the liquid market interest rates such that they converge in the long run to an unconditional ultimate forward rate.

Local Factors Determining COVID-19 Exposure and Property Cash Flows: Evidence from the Canadian REITs

Local Factors Determining COVID-19 Exposure and Property Cash Flows: Evidence from the Canadian REITs This project will help improve the understanding of the impact of COVID-19 on Canadian commercial real estate and REIT markets analyzing across property types. The project also aims to identify local factors helping COVID-19 spread and which ones of those matter… View Article

Building resilience in long-term investment strategies – what has the COVID-19 pandemic taught us about climate risks?

Building resilience in long-term investment strategies – what has the COVID-19 pandemic taught us about climate risks? The purpose of this research is to produce a report that outlines the lessons learned from COVID-19 for investment management, and how these lessons can be applied to building more resilient investment portfolios to climate change. Particularly the… View Article

Investment Risks and Opportunities During a Pandemic: Implications for Institutional Investors

Investment Risks and Opportunities During a Pandemic: Implications for Institutional Investors This project will employ data on such epidemics as the 2002-2004 Severe Acute Respiratory Syndrome (SARS), the 2009 Swine Flu (H1N1), the 2012 Middle East Respiratory Syndrome (MERS-CoV), and the current COVID-19 outbreak, and will try to answer such questions as: How do pandemics… View Article

Strapped for Cash: How Equity Investments Can Weaken the Finances of Pension Plan Sponsors During CV19-type Crises

Strapped for Cash: How Equity Investments Can Weaken the Finances of Pension Plan Sponsors During CV19-type Crises The research objective of this project is to better understand how a pension plan’s equity investments impact the financial situation of the plan’s sponsor entity during severe economic crises such as COVID-19. The analysis will address three main… View Article

Incorporating Water Risk Assessments in Institutional Investment Decisions

The goal of this research project is to provide practical guidelines for institutional investors, risk managers, and insurance/bank professionals who are concerned about the potential effect water risk may have on the value and performance of their investment and/or loan portfolio as well as their expected insurance policy payouts.

Robo Advisors for Canadian Pension Participants

This project provides a discussion of the state of the market for robo advisors in Canada that could assist pension participants, comparing that approach to traditional approaches provided by financial advisers or by target date funds.

Real Estate Valuation: A Deep Learning Approach

Real Estate Valuation: A Deep Learning Approach The project will help develop a better understanding of real estate values in the Canadian property markets using a sample from Montreal housing market. We also aim to work on the commercial real estate markets to improve our understanding in the commercial markets using a US dataset. The… View Article

Drivers of Successful Pension Investing: Lessons from the Canadian Model

Drivers of Successful Pension Investing: Lessons from the Canadian Model The classic model of pension investing faces bleak solvency and funding realities that foreshadow a precarious future and will likely result in defined-benefit (DB) plan obsolescence. Over the past forty years, two factors have seriously attenuated the sustainability of DB plans which provide retirees with… View Article

Decumulation Options for Employer Pension Plan Design: Theory to Practice

Decumulation Options for Employer Pension Plan Design: Theory to Practice For years, policymakers, employer pension plan sponsors, consulting professionals, financial advisors, and academics have focused on accumulating retirement wealth. But with Canadian baby boomers now entering retirement – with longer life expectancy, fewer anticipated sources of family support, and a greater dependency on private savings… View Article