Can the Dutch learn from the Canadians? – Rabobank

Bas van Zanden, Senior Pension Analyst at Rabobank, points out that some Canadian pension funds are allowed to use significant amount of leverage to increase exposure and liquidity and the Canada Pension Plan (CPP) uses a hybrid form of funding that combines features of pay as you go and fully funded plans.

Key Quotes

“The CPP and ABP, the biggest pension funds in Canada and the Netherlands, have significantly different portfolios. The CPP invests more in private equity and infrastructure while ABP invests more in fixed income.”

“The CPP has recorded better returns than ABP in the last decade. This outperformance is smaller when looking at the excess returns, which results into roughly similar Sharpe ratios for both funds.”

“The CPP is a publicly-backed fund which explains and allows for the use of leverage and the offensive portfolio. Given ABP is a private fund, they have different stakeholders with more constraints, which limit their investment and leverage options.”