Canadian pension funds are shifting asset management in-house, new research from CIBC Mellon says, and managers want lower fees and greater transparency on funds managed externally.

The survey of 50 pension managers last year found an average of 22% of assets managed in-house; that figure is expected to rise to 28% this year.

Almost two-thirds of pensions said bringing asset management in-house allows for a clearer alignment of strategies with long-term objectives. More than half cited advantages such as having a better overview of allocation, stronger long-term returns and enhanced governance.

“With pension plan sponsors and managers coming under increased scrutiny from regulators, plan members, employers, counter-parties and other stakeholder groups, the fact that an in-house team can potentially enhance governance may become even more crucial,” the report said.

Only 46% of pensions cited lower overall costs among the top benefits of in-house management. However, of the funds that have taken management in-house, two-thirds said they had reduced costs as a result.

“In an era of low interest rates and low returns, this will be crucial — and some studies suggest that Canadian pensions are reducing their costs by as much as a third by favouring an in-house approach,” the report said.

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