Canadian plans acknowledge the potential benefits of adding more foreign fixed income categories to their portfolios, but it remains unclear if they will actually shift their allocations moving forward. Survey respondents were asked what their expected asset allocation changes might be over the next one to three years. Most plans (63%) disagree with the statement that they will move some domestic assets to foreign fixed income, compared to approximately one-third who agree (34%).
So why are some Canadian plans still not diversifying globally? According to respondents who are currently not invested in foreign fixed income, 19% say the potential return is not worth the effort. They also point to a lack of knowledge and experience (19%), trailed closely by currency hedging policy (16%). (See Figure 4)
These rationales listed by Canadian plans can all be addressed through increased education about the benefits of foreign fixed income, which may mean that more asset managers need to proactively fill the gap and pass on information to plans to help address these hesitations.