MFC Global Survey: 53% of Canadian Defined Benefit Plans Expect to Significantly Shift Equity Mix in Next Two Years

TORONTO, March 22 2007 — With caps on foreign investment lifted for Canadian registered plans, a significant percentage of Canadian defined benefit pension plan sponsors expect to make significant shifts to the equity allocations within their portfolios over the next two years, according to a new survey by MFC Global Investment Management.

On an asset-weighted basis, 53 per cent of defined benefit plans are expected to change their Canadian equity allocations, with a variety of new approaches to be implemented.

The most significant planned increases were with international equities. Fully one-third of plans intend to hike their international (ex. U.S.) equity allocation over the next two years.

Eighteen per cent of plans intend to hike their allocation to U.S. equities while at the same time 13 per cent intend to decrease the allocation. Fifteen per cent of plans intend to hike their allocation to global equities (strategies combining international and U.S. equities).

On fixed income side, more than one in four said they expect to decrease their Canadian fixed income holdings in favor of fixed income investments in the U.S. and international markets, according to the survey. The overall allocation to fixed income, however, will hold steady over the next two years.

“The elimination of the 30 per cent foreign content limit has created an unprecedented investment opportunity for Canadian pension plans to generate enhanced returns and greater diversification potential by making larger allocations to global capital markets,” said Keith Walter, MFC Global’s Senior Vice President for Sales & Marketing. “It appears now that Canadian plan sponsors are moving toward taking greater advantage of those investment opportunities both in equity and fixed income.”

The survey sought to assess the appetite for foreign investment among defined benefit plans with assets in the $75 million to $10 billion range. Telephone interviews were conducted with senior representatives from 148 defined benefit plan sponsors across Canada, who are involved in the asset allocation decision on behalf of their plans. The interviews were conducted between January 5 and February 5, 2007 by The Brondesbury Group.

For Canadian pension plans, equities typically account for 56 per cent of investments and fixed income typically accounts for 41 per cent of investments, while real estate and other alternatives account for approximately three per cent. Canadian stocks typically account for 50 per cent of equity investments, U.S. stocks account for 19 per cent, international (excluding U.S.) for 18 per cent, and global (including U.S.) for 12 per cent.

Emerging markets account for one per cent. U.S. and other foreign investments are generally regarded as quite distinct. Three-quarters of plans describe their U.S. holdings as distinct from other foreign investments.

The survey indicated that while overall investment in U.S. equities is expected to increase, plans with a high proportion of equities in the U.S. also are more aggressively looking to invest in mid-, small- and all-caps seeking both diversification and higher returns.

“Clearly, sponsors are looking for opportunities to find alpha and it appears they expect to find it in the U.S. market, particularly in the mid cap and small cap space,” Mr. Walter said. “We see that the survey indicates that sponsors also will be looking for more active investment management, which also is consistent with plan sponsors’ search for extra returns.”

Many plan sponsors indicated that they stay primarily in Canada for its convenience, ease of investing and to meet their Canadian dollar obligations. Others point to currency risk and foreign market risk as the main barriers to investing more globally. Only four in 10 plans surveyed use hedging to protect against currency risk.

About MFC Global Investment Management

MFC Global Investment Management is the diversified investment management group of Manulife Financial, with investment offices in the United States, Canada, the United Kingdom, Japan, Australia, Hong Kong, and throughout Southeast Asia. MFC Global has more than 100 years of experience managing portfolios for the Manufacturers Life Insurance Company, John Hancock Life Insurance Company, and other major clients. With more than C$240 billion (more than U.S. $210 billion) in assets under management (as at December 31, 2006), MFC Global Investment Management is a leading global investment management group. Additional information about MFC Global Investment Management may be found at

Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Manulife Financial Corporation trades as “MFC” on the TSX, NYSE and PSE, and under “0945” on the SEHK. Manulife Financial can be found on the Internet at