Study
| EST. READ TIME 1 MIN.Should the Canada Pension Plan be Enhanced?
Many proponents of Canada Pension Plan (CPP) reform call for its mandatory expansion, while others have made the case for alternatives. This study examines CPP expansion from an economies-of-scale perspective to assess the potential impact of expansion on the Canada Pension Plan Investment Board's (CPPIB's) performance in managing costs and generating returns.
The empirical literature reviewed in this study found that fund managers generally experience diseconomies of scale at some point in generating investment returns as their asset base increases, although relatively large pension plans can take action to offset these diseconomies.
The study concludes that diseconomies of scale present a risk to the CPPIB's investment performance. The actions that the CPPIB is taking to offset diseconomies of scale in investment returns will likely become less effective as its assets continue to grow. Even modest expansion of the CPPIB will increase the risk that the CPPIB will not meet its objectives in helping the CPP fund Canadian retirement incomes.
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Neil Mohindra
Neil Mohindra is the former Director of the Centre for Financial Policy Studies at the Fraser Institute where he authoreda number of papers, articles, and opinion pieces on securities regulation and insurance. Mr. Mohindra previously worked for the Financial Services Commission of Ontario as Policy Manager for the Joint Forum Secretariat, Joint Forum of Financial Market Regulators, in which he managed the cross-sectoral projects of Canadian provincial pension, securities, and insurance regulators. This included strategic planning, developing policy options and recommendations, managing external stakeholder engagement, and developing communications strategies. Mr. Mohindra worked for Insurance Bureau of Canada as a Senior Policy Analyst and led the development of industry positions on a number of issues key to the property and casualty insurance industry such as the 2006 review of federal financial institutions legislation. Prior to Insurance Bureau of Canada, he was a policy analyst on financial sector issues at the Department of Finance Canada where his responsibilities included briefing the departments member on the Financial Stability Forum. Earlier, he was a research associate with the Task Force of the Future of the Canadian Financial Services Sector (the MacKay Taskforce). He holds a BA (Honours) in Social Sciences (Economics) from the University of Ottawa and an MBA in Finance from McGill University.… Read more