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The Canadian Pension Fund Model

A Quantitative Portrait

Final Report

Sebastien Betermier & Quentin Spehner, McGill University

Alexander Beath & Chris Flynn, CEM Benchmarking

About this Report:

In this study, we aim to understand how Canadian pension funds directly invest in private markets in comparison to their international counterparts. We focus our attention on the real estate sector in which Canadian funds have been particularly active, and analyze hundreds of real estate transactions made by Canadian and non-Canadian funds over the past 20 years.

We show that Canadian funds pursue a distinct investment strategy in the private real estate market. They tend to make larger and more diversified real estate acquisitions and are more likely to pursue value-added investments than their international peers. Through their real estate subsidiaries, Canadian funds directly manage the assets themselves and also undertake large greenfield investments. Moreover, Canadian funds tend to partner up abroad to reach economies of scale and expand their business model beyond Canada. These findings altogether reveal an activist and integrated model of active management that departs from the standard framework of corporate governance which advocates for a separation of ownership and management (Tirole, 2006).