Canadian asset owners face mounting operational and liquidity challenges even as they push further into private markets, Northern Trust says
Private markets have moved from a portfolio add-on to a core building block for Canadian institutional investors, according to Northern Trust's recent 2026 Asset Owner Study.
The asset management firm’s research found that 94 per cent of asset owners globally now invest in private markets, up from 87 per cent a year earlier. In Canada, participation is universal as every single Canadian respondent holds private market assets.
"Canadian asset owners aren't debating the trends. They're already operating in them," said Katie Pries, Country Executive for Northern Trust Canada. "Private equity infrastructure, real estate and private debt are already foundational to how Canadian asset owners build portfolios," she said. "The conversation isn't about increasing exposure in a vacuum. It's about governance and pacing, liquidity and operational capability."
Where are asset owners getting private capital?
Grant Johnsey, Head of Market Solutions, Banking & Markets, Americas at Northern Trust, acknowledged private equity remains a major draw for Canadian pensions, though the way they access it has shifted. For example, Canada’s Maple Eight funds appear to favour co-investments and direct deals over buying into traditional fund structures, a trend Johnsey noted is playing out on the private credit side just as it has in private equity.
There's also growing interest in asset-backed or collateralized private credit, supported by infrastructure or real assets.
Meanwhile, the capital flowing into PE is landing in familiar sectors — tech, healthcare, logistics, and sustainable energy — a pattern he said isn't unique to Canada but consistent with what he sees among large allocators globally.
While infrastructure continues to be a mainstay, Johnsey doesn't expect that to change. After all, he emphasized how Canadian pensions have long been active in global infrastructure, not just domestic projects, and that appetite shows no signs of slowing down, he said.
Private credit has also gained significant traction over the past decade, with Canadian plans following the same trajectory as their US counterparts in building out exposure. Commercial real estate rounds out what he identified as the four primary destinations for Canadian pension capital in private markets.
“A trend we've now seen three years running among Canadian asset owners is a shift into private and out of publics,” he noted.
Less demand for long-term bonds
Johnsey acknowledged the survey didn’t break down which asset classes are underperforming but was quick to note the good run of performance with one exception, pointing to developed market bonds in the last five years.
While he doesn’t suggest that underperformance is necessarily what's driving it, “you are seeing in the US, less demand for intermediate longer-term bonds unless you're running a LDI strategy,” he said.
“US treasuries have been underperforming. That is fact. And that has caused issues for some US pension plans which again would encourage them to go longer on the equity side because the bond side has been net negative returns in some years. They need to juice that by getting and chasing returns, so that's why you're going to see a higher equity allocation,” he said.
That pressure is less acute in Canada, Johnsey explained, noting funding structures are more stable and plans aren't scrambling to close return gaps. Private allocations have risen globally, and US plans are part of that wave, but less aggressively than Canadian peers due to what he described as funding uncertainties and liquidity constraints.
The shift toward private markets has also elevated the importance of cash as a strategic allocation, he said.
"It is giving you a much higher return than it was 10 years ago or 20 years ago for that matter. And on top of that, you do have that diversification you're getting from it that frankly you're not really getting as much from bonds right now. But I wouldn't say cash is king," he added, noting Canadian pensions with higher private market exposure tend to hold slightly more cash to manage capital calls and liquidity needs.
To that end, Pries sees liquidity as something more fundamental for Canadian allocators.
"Liquidity has certainly become a resilience tool for the Canadian asset owners and not just a portfolio buffer," she said.
While Canadian pension capital has historically flowed outward rather than staying domestic, Johnsey expects that balance to shift.
"I am bullish on that," he said, pointing to the Carney government's efforts to channel more institutional investment back into Canada. For now, he believes the trend remains global-first, with domestic allocation playing a secondary role.
Canadian pensions outpace US peers
The differences are rooted in funding mechanics, Johnsey noted. He suggests Canadian pension funds benefit from predictable, automatic contributions, whereas US public plans face political interference, inconsistent funding, and fragmentation across thousands of municipal and state entities.
"Unlike the US where you have these pension plans are very much political entities and you have these ebbs and flows of monies coming in, it makes it really hard to lock into anything longer term because it creates more liquidity and funding issues," Johnsey said. Whereas Canadian funds can commit to long-duration, illiquid investments with greater confidence.
Scale plays a role here too. Johnsey noted the smallest Maple 8 fund manages roughly $50 billion to $70 billion. In the US, that would rank among the largest state plans but that concentration of capital allows Canadian pensions to build internal investment teams that make direct investments, something most mid-sized US plans can’t justify, Johnsey explained.
"The setup in Canada and among the Canadian pensions, especially the Maple Eight, is very different than what you see in many markets, but especially the US," he said.
Operational complexity tests allocators
The challenge now for asset allocators is operational as both Pries and Johnsey flagged data accuracy, governance, and the sheer complexity of managing illiquid portfolios as persistent concerns. Pries highlighted that Canadian asset owners rank provider expertise above technology when selecting partners.
"The technology alone is not the story. The premium is on the expertise plus technology because many institutions already operate complex, globally diversified and less liquid portfolios," she said.
Meanwhile Johnsey pointed to reinvestment pressure and pricing opacity as a different set of risks, noting with more capital chasing private deals, the ability to redeploy proceeds from maturing investments becomes harder.
“That's why we're seeing the rise of continuation funds on the private equity side, for example,” he said, noting when a five-year fund ends but still holds strong assets, rolling those into continuation vehicles has become an increasingly common workaround.
