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Canada's Pension Funds Are Piling on Leverage, Moody’s Warns

  • Average leverage has increased to 24% from 19% since 2009
  • Volatility exposure raises question: ‘Why take on more risk?’
The city skyline is seen at night from Stanley Park in Vancouver, British Columbia, Canada.

The city skyline is seen at night from Stanley Park in Vancouver, British Columbia, Canada.

Photographer: Ben Nelms/Bloomberg
Updated on

Canada’s public pension funds, among the biggest in the world, are piling on risk with leveraged bets in a chase for higher returns, Moody’s Investors Service warns.

The nation’s six biggest pension funds have increased their average leverage to 24 percent, from 19 percent in 2009, in an effort to offset the impact of declining pension member contributions and low interest rates on their cash flow and investment returns, Moody’s said in an Oct. 3 report written by analyst Jason Mercer. That’s leaving the funds exposed to volatility in the returns they’re counting on to fund future pension payouts.