Major equity markets performed well in 2025, which was a key driver for another year of improved funded positions for many DB pension plans. Although most pension plans are well funded today, pension investment strategy will continue to remain important through 2026.

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In the midst of a tariff war with the U.S. and concerns about low productivity improvements in the Canadian economy, there have been calls for Canadian pension plans to invest more in Canada. In its November 2025 budget, the federal government announced an initiative of the Business Development Bank of Canada intended to incentivize investments in Canadian assets by pension funds and other institutional investors.

In 2026, Canadian pension plan administrators and the investment managers that they hire will have the opportunity to assess whether sufficient attractive Canadian investments are available that would support an increased allocation to Canadian assets.

With the incredible performance in recent years of the ‘Magnificent Seven’ stocks, the U.S. equity market reached record levels of concentration in 2025. Also, above-average recent returns for equity markets increase the likelihood of market corrections, although the timing and magnitude are difficult to predict. Maintaining sufficient portfolio diversification can reduce the impact of these risks on a plan’s funded positions.

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