For more than 30 years, Canada's pension funds have been a global model, pioneering direct investments in alternative assets such as private equity, infrastructure, and real estate. The so-called "Maple revolutionaries" built an enviable track record, helping Canada achieve the third largest share of pension wealth of any nation. By 2021, Canada had eight of the world's 100 biggest pension funds, and UK Chancellor Rachel Reeves even urged Britain's pension industry to learn from the Canadian approach.

However, the model is showing signs of strain. The Canada Pension Plan Investment Board (CPPIB), the country's flagship fund and the seventh largest globally, reported in its latest annual results that the fund's value rose 7.8 per cent net of fees in the year to March — but trailed its benchmark portfolio by 5.4 percentage points. This marked the third consecutive year of underperformance, the longest such stretch since 2007. Other major Canadian pension funds, including Ontario Teachers and Alberta's Aimco, have also underperformed their benchmarks over the same period.

A significant contributor to CPPIB's struggles has been its private equity portfolio, which accounts for 24 per cent of its total assets. Net of fees, private equity returned just 2 per cent last year, and according to CPPIB's own figures, private equity has added no value to the portfolio over a full decade. The broader private equity market is facing headwinds as well: deals and exits have slowed, and holding periods have lengthened to roughly seven years, up from five to six years between 2010 and 2021.

Experts caution that broader context is important. Canada's Office of the Chief Actuary confirmed in December that CPPIB can deliver the 4 per cent real return needed to remain financially stable, and over the past decade the fund has achieved 5.9 per cent in real terms. University of Calgary economist Jack Mintz noted that CPPIB has earned "a pretty good return" over 10 years, though assessing performance is difficult given limited detail on underlying alternative asset holdings.

Nonetheless, the challenges raise questions about the long-term competitive advantages that CPPIB and its Canadian peers have enjoyed for decades — particularly their size and ability to manage private holdings internally — as greater competition from institutional and retail investors makes earning outsized returns from private equity increasingly difficult.