CAPSA update on use of leverage in pension plans — Canadian Investment Review

In the wake of the Canadian Association of Pension Supervisory Authorities (CAPSA) releasing an update on pension plans using leverage, Osler partner Julien Ranger tells Canadian Investment Review that plan administrators should be using leverage in a prudent way. In her article, author Yaelle Gang discusses how while the CAPSA update “didn’t include concrete guidelines or recommendations, it suggested more may come.” The article also explores how a CAPSA leverage working group determined that pension plans use leverage in two ways: synthetic leverage and financial leverage. Julien, a partner in Osler’s Pensions & Benefits Group, says that plan administrators have a general fiduciary obligation to act prudently so they “shouldn’t be using strategies they don’t understand.”

“But I guess the regulators are asking, ‘Is that enough?’ Do we need to put more in place to ensure that leverage is used in a prudent way?’” Julien says.

Outside of rules surrounding prudent behaviour, Julien tells Canadian Investment Review that since “there are some restrictions in the Income Tax Act about borrowing money, pension plans need to be careful about how they structure strategies.”

For more information, read author Yaelle Gang’s article “CAPSA update on use of leverage in pension plans” on March 6, 2019 in Canadian Investment Review.