Key market trends for 2009 in Canada will include the growing use of foreign investments and alternatives, Dev Clifford, managing director, Greenwich Associates told a sold out crowd attending the CPBI Ontario Region's Pension Investment Forecast recently held in Toronto.

"While corporations have held closer to 'traditional' product usage patterns and remained heavily tilted towards Canadian dollar assets, public funds have been pioneers in the use of real estate and infrastructure," Clifford noted.

Based on interviews with 277 of the largest tax-exempt funds in Canada between August and September 2008, Greenwich reported the biggest increase from 2007-2008 was in infrastructure investment (from 7% to 11% of funds surveyed) but assets invested in alternative products grew as follows:

Real estate: 2007: $85.4 billion; 2008: $92.5 billion.

Private equity: 2007: $52.5 billion; 2008: $60.7 billion.

Hedge funds: 2007: $12.8 billion; 2008: $25.4 billion

A number of pension funds expect to continue reducing their allocation to Canadian equities while increasing their allocation to real estate (30); hedge funds (20); private equity (22); and infrastructure (37).*

Scotiabank's Managing Director, Pension Assets Josephine Marks acknowledged that some alternatives have lost less compared to equities in 2008, but says she would be surprised to see a pronounced shift of assets to alternatives in 2009. "How many times have we heard that and then the next year we hear amounts flowing into these investments have been far more limited than was forecast?"

"I think the difference between the alternatives and conventional assets is where the losses have come from makes pension committees nervous," Marks continues. "The losses came from things like lack of controls, operational issues or the proverbial rogue traders. Pension funds are also cautious about going into these investments due to the governance requirements and their inherent complexity."

*Of 140 funds reporting.