Real estate bets gone wrong roil US$1.24 trillion Canadian funds

Almost no major Canadian pension manager has been spared.

The largest fund, Canada Pension Plan Investment Board, lost five per cent on its property portfolio in its last fiscal year as the commercial real estate slump deepened. For the Public Sector Pension Investment Board, the pain amounted to a staggering 16 per cent loss on those bets, the worst fiscal year performance for those investments since the global financial crisis.

With the property market upended by higher borrowing costs, Canadian pensions — known for their massive real estate businesses that were the envy of the investing world for years — are feeling the sting. And it’s leading at least four major funds to now drastically retool their operations.

“What’s worked famously well for the last 35 years may not work so well for the next five to 10,” Jo Taylor, chief executive officer of the $248 billion Ontario Teachers’ Pension Plan, said in an interview at Bloomberg’s Toronto office.