'Adding real assets enhances potential diversification, inflation protection and risk-adjusted return of the overall strategy,' explains Manulife Investment Management's Michael Banfield
Manulife is moving to expand the menu of investment options available to defined contribution (DC) plan members in Canada by incorporating real assets into its target date fund offerings, a space traditionally reserved for the country’s largest institutional investors.
Real assets, like real estate, infrastructure, farmland, and timberland, have long been the domain of defined benefit (DB) plans, endowments, and pension giants. Michael Banfield believes that exclusivity is something his team is working to change. Unlike financial securities that are based on intangible contractual rights, real assets are physical and tangible, which Banfield sees as a key differentiator.
“Real asset exposure has been the domain of defined benefit plans for over 50 years,” said Banfield, head of Canada retirement investment product and head of global retirement investment partnerships at Manulife Investment Management. “DC plan members and plan sponsors have been left to the side, not able to access these asset classes for a variety of reasons.”
Those reasons have historically included scale, cost, liquidity constraints, and governance challenges. But Banfield believes the time has come for real assets to play a central role in DC portfolios, especially given how most Canadians invest for retirement today.
Asked why Manulife chose this moment to launch its Manulife Real Asset Pooled Fund, Banfield underscored that “it’s long overdue,” crediting years of behind-the-scenes discussions with sponsors, advisors, and consultants for driving the decision, as well as growing pressure to modernize DC offerings.
Banfield sees the democratization of private markets not as a trend, but as a shift in the core asset mix for Canadian retirement plans.
“This is the next big asset class,” he said. “This isn’t a phase that we’re going through. This is the next asset class beside fixed income and equities that everyone will have going forward.”
That solution centers on target date funds. As Banfield explained, the firm has introduced a real asset allocation into select vintages of its target date suite products that now dominate DC plan flows across the country. Banfield argues that this design provides a structural workaround to the usual liquidity and access issues that have long kept private assets out of reach for the average retirement investor.
“If you look at the Canadian retirement market, most flows are going into target date solutions, so most Canadian plan members probably use a target date solution and are shut out. We've found a way to integrate private assets into the solution that a vast majority of Canadian plan members are already utilizing. It just enhances the target date fund design.”
His rationale hinges on diversification as DC portfolios have historically focused on stocks and bonds, but real assets, Banfield argues, bring different characteristics to the table, highlighting lower correlation to public markets, potential inflation protection, and more consistent long-term returns.
“Adding real assets enhances potential diversification, inflation protection and risk-adjusted return of the overall strategy,” he said.
In that sense, Banfield disagrees with the view that private market investments are inherently too illiquid for retirement portfolios. He noted that Manulife’s approach includes a 20 per cent weighting to liquid public real assets, such as REITs and global bonds, to manage redemption activity. Meanwhile, embedding the real asset fund within a broader multi-asset framework helps smooth out liquidity risk across the product.
“At a plan member level, the fund offers daily liquidity,” he said. “At a plan sponsor level, there are redemption notification periods that a sponsor would have to adhere to.”
Still, he acknowledged that concerns remain noting one of the most common misconceptions is that real assets are prohibitively expensive.
“That’s partially true,” he said. “But we found a way to embed it within our target date solution while still keeping the overall price of the target date solution low.”
Education, he added, is key.
“We have to spend some time educating folks. As much as people were saying they want access to private assets, we have to make sure that we educate people on how to properly get access to this,” he said, adding that some investors hear “private markets” and immediately expect outsized returns, a misperception he’s quick to challenge.
“That’s not the reality of what private assets do. It really is a diversification vehicle and an inflation protection vehicle,” he said.
Banfield believes that DC plans risk falling behind, pointing to a structural imbalance in the Canadian retirement landscape. While DB plans have long had the tools to deploy capital into timberland or cranberry farms, the average DC plan member has been stuck with mutual funds and ETFs tied to public markets. The gap, he said, is not in capital but in design.
“Smaller DC plans often lack the scale, governance, and operational capacity to manage these investments on their own,” he said. “Embedding private assets within a target date fund structure helps mitigate these issues.”
