February 11, 2025 — Canadian institutional investors are shaking up their investment portfolios by slashing allocations to equities and increasing exposures to potentially higher-alpha private market strategies on the one hand, and more conservative liability-driven investment strategies on the other. 

Roughly a quarter of the Canadian institutional investors taking part in a new Crisil Coalition Greenwich study plan to “significantly” cut allocations to active Canadian equities over the next three years, and a third are planning major reductions to passive domestic stocks. Half the institutions intend to significantly reduce allocations to passive domestic equities. 

Meanwhile, institutions are bulking up on private assets. Nearly two-thirds of institutions intend to significantly increase allocations to private debt. Not a single institution is planning major reductions to the asset class and almost half the institutions are planning big increases in private infrastructure equity (with only 6% planning significant cuts). About half the institutions are planning sizable increases in private equity, but 38% are planning major reductions. 

“In our annual research with institutional investors around the world, it’s rare to see so many institutions moving in the same direction at the same time,” says Mark Buckley, Global Head of Investment Management at Crisil Coalition Greenwich. “If institutions carry through with these plans, it will represent a fundamental re-shaping of institutional investment portfolios in Canada and a boon to asset managers offering private strategies.” 

Corporate Pension Plans Shifting to LDI
Among Canadian corporate defined benefit plans, many of the assets flowing out of equities are being invested in liability-driven investment strategies built to immunize plan sponsors from future pension funding risks. Across the entire universe of institutions, fully 40% are planning significant increases to LDI strategies, which are used primarily by corporate DB plans. 

“Canadian companies are taking advantage of higher interest rates, which make implementing LDI strategies more affordable, to achieve a long-term goal of reducing risks associated with their defined benefit pension plans,” says Mark Buckley.

Fewer Institutions Consider ESG and DEI When Selecting Asset Managers 
Fewer Canadian institutions consider ESG and DEI factors when selecting asset managers, although consideration rates remain relatively high. In 2023, 83% of the Canadian institutions participating in Crisil Coalition Greenwich research considered ESG when assessing and picking managers for their investment portfolios. In 2024, that share fell to 75%. Over the same period, the share of institutions considering DEI in manager selections dropped from roughly two-thirds to 55%.