Canadian Pension Plans are Keen on 130/30

Date: Thursday, November 8, 2007
Author: Don Bisch, Benefits Canada

Nearly one-third of Canadian pension funds are seriously considering or are already using a 130/30 strategy, according to a new survey from Pyramis Global Advisors.

Of the 157 defined benefit (DB) pension plans surveyed. 26% are seriously considering a 130/30 strategy while another 4% have already implemented the strategy, also known as limited shorting. With the strategy, 130% of assets are invested in long positions while 30% is sold short.

“[130/30] seems to have legs,” said Peter Chiappinelli, senior vice president investment strategy and asset allocation at Pyramis Global Advisors, at an event to present the survey findings. He pointed out that many pension funds still prohibit short selling, but that many plans are taking a keen interest in the strategy. “It’s all talk right now,” said Chiappinelli. “But they’ve bought into the academic case [for 130/30].”

Interest in 130/30 was higher among public plans. Almost half have are either seriously considering it or have already implemented it, compared with only 19% of corporate plans. According to a similar survey in the U.S., 58% of plans (64% corporate and 53% public) are seriously considering or have already implemented 130/30.