{"id":637796,"date":"2026-04-30T04:10:39","date_gmt":"2026-04-30T04:10:39","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/637796\/"},"modified":"2026-04-30T04:10:39","modified_gmt":"2026-04-30T04:10:39","slug":"has-the-case-for-following-pension-fund-strategies-become-less-compelling","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/637796\/","title":{"rendered":"Has the case for following pension fund strategies become less compelling?"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

For pension funds or other large institutional investors, lock-up periods for private asset investments can reach a decade or more.Nathan Denette\/The Canadian Press<\/p>\n

The value of the traditional 60 per cent equities, 40 per cent bond portfolio is in question in today\u2019s more complex economy, including the higher correlation among publicly traded assets. <\/p>\n

Riding shotgun is the investment industry\u2019s marketing push for retail investors to own multi-asset portfolios, similar to pension funds, that include exposure to private assets such as credit, equities, infrastructure and real estate. <\/p>\n

A slew of new, \u201csemi-liquid\u201d private asset funds is being sold on the basis that they will produce superior returns and lower volatility than public assets over the long term. <\/p>\n

However, as some of Canada\u2019s largest pension funds<\/a> have reported losses in 2025 on their private assets<\/a>, is the case for \u201cdoing what the pension plans do\u201d less compelling? <\/p>\n

Chay Ornthanalai, associate professor of finance at the University of Toronto\u2019s Rotman School of Management, says the semi-liquid retail products are a positive development by providing diversification.<\/p>\n

\u201cThe illiquidity premium is a real thing. You\u2019re getting paid extra for forfeiting the ability to buy and sell anytime,\u201d he says.<\/p>\n

However, he adds the caveat that retail investors have very different withdrawal requirements from pension funds. <\/p>\n

Whereas redemptions by pensions are diversified by demographics, \u201cfor a retail investor, if something happens to you or your family tomorrow, you might need those funds immediately. That\u2019s harder for a fund provider to diversify away,\u201d he says. <\/p>\n

For pension funds or other large, institutional investors, lock-up periods can reach a decade or more. The newer \u201csemi-liquid\u201d retail funds permit up to 5 per cent redemptions each quarter. <\/p>\n

\u201cThe fund companies dangle the illiquidity premium in front of retail investors,\u201d but Mr. Ornthanalai questions how much of that premium is captured when capital is withdrawn frequently. <\/p>\n

\u201cA retail investor can never be a pension fund that can commit all its capital for 50 years or more. However, if someone is thinking in generational terms, like a quasi-family office, then locking up the funds can be beneficial for compounding returns for heirs.\u201d <\/p>\n

Sean O\u2019Hara, co-founder and chief investment officer of Toronto-based Obsiido Alternative Investments Inc., views the current challenges in private credit<\/a> as being primarily liquidity-related. <\/p>\n

\u201cThere are no flashing signals with respect to credit quality,\u201d he says.<\/p>\n

The main issue is investor suitability, particularly their tolerance for illiquidity, he adds. <\/p>\n

\u201cIn contrast to the behaviour of many individual investors who are exiting these funds, institutions are seeking to take advantage of mispricing caused by market dislocations.\u201d<\/p>\n

Mr. O\u2019Hara calls this a \u201cteachable moment\u201d for the industry and investors alike. <\/p>\n

\u201cThe \u2018semi-liquid\u2019 tag is probably not helpful as it implies there is more liquidity \u2013 because, bottom line, the underlying assets are illiquid,\u201d he says. <\/p>\n

For products marketed to individual investors, large global private asset managers such as KKR & Co. Inc., Apollo Global Management Inc. and Carlyle Group Inc. structure their funds with a liquidity sleeve to provide enhanced liquidity features compared to what would be typical in a closed-end institutional fund structure. <\/p>\n

This liquidity sleeve causes a small drag on performance, but the investor is still getting the extra yield over tradable bank loan portfolios, Mr. O\u2019Hara says.<\/p>\n

He recommends investors diversify among private asset classes, portfolio managers and a range of differentiated strategies. <\/p>\n

\u201cWhere investors can run into trouble is if you\u2019re in a single fund within a single sector that works until it doesn\u2019t.\u201d <\/p>\n

For example, many investors are overly exposed to sectors of the Canadian real estate market through funds that have suddenly gated<\/a> and frozen redemptions, he says. <\/p>\n

Obsiido runs two open-ended, multi-asset, multi-manager private asset portfolios that provide investors with quarterly liquidity features. <\/p>\n

If the current challenges facing private markets are indeed a \u201cteachable moment,\u201d what would the perfect retail product look like? <\/p>\n

For Mr. Ornthanalai, that would include greater transparency on how yield and total returns are calculated, and it would have a minimum lock-up period of 20 years and an investment threshold of $10-million or more. <\/p>\n

In response to the growing demand from advisors to understand private market products, Rotman is redesigning the Master of Finance program for September, 2026, with an enhanced private markets curriculum. <\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: For pension funds or other large institutional investors, lock-up periods for private asset…\n","protected":false},"author":2,"featured_media":637797,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[1397,45,49,48,133,5266,2922,131,132],"class_list":["post-637796","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-appwebview","tag-business","tag-ca","tag-canada","tag-finance","tag-globe-advisor","tag-noastack","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/637796","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=637796"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/637796\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/637797"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=637796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=637796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=637796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}