Discussing CAAT Pension Plan's 2025 Results With Acting CEO Kevin Fahey
CAAT Pension Plan earned 8.4% last year as buoyant stock performance outweighed soft returns in the fund’s private market portfolio.
The gains, which pushed assets to C$25.4 billion ($18.6 billion), were below the benchmark of 11.2%. That was driven “almost entirely” by the pension plan’s private equity allocation, which returned 1.5% compared to its benchmark of 19.6%, according to CAAT’s annual report published Thursday.
Public equity holdings gained 21.7% in 2025, while credit and real assets returned 3.7% and 4.1%, respectively.
Private markets suffered from constrained liquidity and subdued deal activity last year as higher interest rates and macroeconomic uncertainty weighed on investor sentiment and valuations, the Toronto-based pension plan said in the report.
The pension plan is “modestly” exposed to software companies affected by advancements in artificial intelligence across its private equity and credit holdings, Chief Investment Officer Kevin Fahey said in an interview, adding that the exposure won’t be a “significant headwind in either portfolio.”
CAAT plans to allocate capital to real assets this year as it remains underweight its target mix, said Fahey, who is also acting chief executive officer. “We have some work to do specifically in that space, and that will come out of a combination of the public equity and fixed income markets.”
The softer US dollar also hurt CAAT’s returns last year. Canadian pension funds are among the largest holders of US assets in the world, and are vulnerable to a weaker greenback.
CAAT, which serves more than 850 employers in 20 industries, has been dealing with internal tension in recent months.
The board of trustees launched an independent review after a controversial payment to the then-chief executive officer exposed broader concerns about governance, board oversight and workplace conduct.
CEO Derek Dobson exited the fund in March after being placed on leave amid concerns over C$1.6 million he received for unused vacation time. Three of the pension plan’s senior executives had approached the board in November with concerns over that payout and a relationship between Dobson and another CAAT employee.
CAAT made Fahey acting CEO after Dobson went on leave. The board is focused on appointing a permanent CEO, according to the annual report.
“CAAT’s independent governance review is now in its final stages,” the pension plan said in a statement.
Fahey said he’s confident in CAAT’s ability to maintain a long-term focus for its members. “We’re going to do a good job setting up our next CEO for success,” he said.
Earlier today, CAAT Pension Plan issued a press release stating it delivered strong 10-year returns, reinforcing long-term stability for members and participating employers:
Toronto, April 23, 2026 – The CAAT Pension Plan announced strong investment results in its 2025 Annual Report, underscoring a decade of solid performance and funding health. Over the past 10 years, the Plan has delivered an annualized net return of 9.6% supported by a one-year net return of 8.4% in 2025.
“CAAT’s investment program continues to deliver long-term returns that promote Plan health,” said Kevin Fahey, Acting CEO and Plan Manager and Chief Investment Officer. “Our 2025 results only add to my confidence in the Fund. Our 10-year annualized net return significantly outperformed CAAT’s policy benchmark and discount rate, which reflects the long-term rate of return required to make the Plan sustainable.”
Stability
On January 1, 2026, the CAAT Pension Plan’s assets were $25.4 billion with a funding reserve of $6.7 billion, up from $23.3 billion and $6.1 billion, respectively, the previous year. The Plan is 124% funded, meaning CAAT holds $1.24 in assets for every dollar of pension obligations - a strong indicator of benefit security and long-term sustainability for members.
Predictable income, meaningful benefits
CAAT provides beneficiaries with predictable lifetime income in their retirement. In 2025, the Plan paid more than $760 million to pensioners.
CAAT’s strong funded position directly translates into meaningful benefits for its members and participating employers. For instance, in 2025, the Plan extended its conditional inflation protection for eligible members to 2028, helping preserve the purchasing power of their pensions over time. CAAT has granted this enhancement every year since its introduction in 2007. CAAT also enhanced survivor benefits by increasing the minimum payment guarantee from 60 times to 180 times a member’s first monthly pension amount and by introducing a 100% survivor pension option.
Two previously announced initiatives strengthened the value of Plan participation. CAAT increased the annual pension factor to help DBplus members build retirement income faster without contributing more to the Plan. It also lowered the contribution rate for DBprime members while leaving benefit entitlements unchanged. For employers, these enhancements reinforce a competitive total rewards offering and demonstrate the value Canadians place on workplace pensions as a foundation for financial well-being.
An enduring promise
While many of the forces that shaped the economy over the past 50 years including globalization, declining interest rates and low, stable inflation may have run their course, Mr. Fahey says “the resilience of CAAT’s investment program enables the Fund to withstand periods of volatility and adapt to market conditions in the short-term to manage risk and take advantage of opportunities. As such, broader challenges in any given sector or the economy do not impact the ability of the Plan to pay pensions now or in the future.”
About CAAT Pension Plan
Established in 1967, the CAAT Pension Plan is an independent, jointly governed plan that offers highly desirable modern defined benefit pensions. Originally created to support the Ontario college system, the CAAT Plan now proudly serves more than 850 participating employers in 20 industries, including the for-profit, non-profit, and broader public sectors. It currently has more than 125,000 members. The CAAT Plan is respected for its pension and investment management expertise and focus on stability and benefit security. On January 1, 2026, the Plan was 124% funded on a going-concern basis.
Earlier today, I had a discussion with CAAT Pension Plan's acting CEO and Plan Manager and CIO, Kevin Fahey, to go over their 2025 results.
Before I get to my discussion with Kevin, I'd like to go over some items from the annual report which you can download here.
First, a message from Chair Audrey Wubbenhorst and Vice-Chair Janet Greenwood:
I note the following:
Strong governance is the foundation of trust in and long-term security of the CAAT Pension Plan. It is reinforced by the Board’s commitment to continuous improvement, disciplined oversight and a willingness to act decisively in the best interests of Plan beneficiaries.
To this end, the Board initiated a comprehensive review to evaluate the Plan’s governance framework against evolving best practices. This work included consideration of governance-related matters brought to the Board’s attention. To ensure objectivity, an independent expert was engaged to conduct the review. Based on the findings, the Board will identify targeted areas for enhancement and develop a set of actions to ensure CAAT’s governance continues to support the long-term success of the Plan.
A fundamental role for the Board is to provide oversight and counsel to keep CAAT focused on its strategy and the beneficiaries’ long-term interests, including maintaining continuity in leadership and decision-making during transitions. At the outset of CAAT’s current transition, the Board appointed Kevin Fahey as Acting Chief Executive Officer to ensure stability in leadership and operations. With leadership continuity in place, the Board is now focused on appointing a permanent CEO.
Basically, the Board is doing its job properly, appointed an independent expert to make recommendations on how they can improve their governance, and the findings of this independent review will be made public when completed.
Next, a message from the Acting CEO and Plan Manager and CIO, Kevin Fahey:
I note the following:
CAAT’s investment program is designed to turn contributions from members and employers into predictable retirement income for life. Our focus on long-term performance strengthens the funding position and overall health of the Plan. In 2025, CAAT achieved a 10-year annualized net rate of return of 9.6%, supported by an annual net return of 8.4%.
Today, our $25.4 billion fund is diversified across asset classes to achieve our targeted rate of return while helping mitigate market volatility and adverse economic conditions. CAAT’s $6.7 billion surplus – built through years of disciplined investing and risk management – also serves as a stabilizing force.
On a going concern basis, the Plan is 124% funded, meaning CAAT holds $1.24 in assets for every dollar of pension obligations. That is a strong indicator that members’ benefits are secure and the Plan is sustainable.
Strong funding enables tangible day-to-day value for members and employers. These outcomes are guided by our Funding Policy, which establishes clear guardrails for contributions, reserves and benefit decisions.
It is important to note that despite the governance issues the Plan faced last year, it remains one of the best -- if not, the best funded -- Plan in Canada.
Next, a Q&A with Kevin Fahey which is definitely worth reading:
I note the following:
You were appointed as Chief Investment Officer in January 2026. How are you approaching this new role?
CAAT’s investment strategy has delivered strong performance over the long term, and as such, I see no need to change an approach that continues to be effective. It’s a reflection of the incredibly talented and dedicated teams that oversee our investment program – many of whom I have worked alongside for years. Not only do they have the expertise and discipline to manage the Fund, they care deeply about the role it plays in supporting CAAT’s purpose. That unique mix of skill set and passion is fundamental in sustaining our investment goals well into the future.
In terms of CAAT’s performance in 2025, what do you want members to know?
Overall, our investment program delivered a strong performance in 2025. The fund’s 8.4% rate of return surpassed what we required on an annual and 10-year basis to enhance the long-term health of the Plan. For every dollar of pension obligations, CAAT has $1.24 in assets. The bottom line is, members can feel confident their pension is secure.
Putting the annual performance aside, your team places greater importance on long-term returns. Why?
I’ll give you an example related to the Plan’s enhancements in 2025. CAAT increased
the annual pension factor to help DBplus members build retirement income faster without contributing more to the Plan. We also lowered the contribution rate of DBprime members while keeping the same pension promise. Many factors go into these decisions, but they were made possible by the Fund’s status. And that’s a reflection of the success our investment program has had over the course of 10 to 15 years.
The key thing here is following the departure of former CIO Asif Haque, the strategy isn't changing and the funding status remains solid because long-term returns are strong.
Alright, let me get to the key highlights for 2025:
And here is CAAT Pension Plan's asset mix at the end of last year:
As you can see, Public equity (30%), Nominal Bonds (12%), Inflation-linked bonds (5%) and commodities (3%) make up 51% of the portfolio with Credit (8%), that moves to 59%.
Real assets (25%) and private equity (17%) make up 37% of the portfolio.
Given the tilt toward public markets, I wasn't surprised the overall performance of 8.4% was strong as Public equity had an exceptional year:
Also worth noting, returns in private markets were muted but better than many of their larger peers.
What else? Like its peers, the Plan underperformed its benchmark last year and the issues were in private equity which has a public market benchmark that soared last year:
The key thing here is that over the last 5 and 10 years, CAAT Pension Plan has outperformed its benchmark.
Discussion With CAAT Acting CEO and Plan manager and CIO Kevin Fahey
Let me get right into my discussion with Kevn Fahey.
I want to thank Kevin for taking the time to call me earlier and also thank Stephen Hewitt and Erin Hamilton for scheduling the call and sending me material on an embargoed basis.
Kevin began by giving me an overview of the results:
I think the engine, clearly, last year, was the public market piece. There were great tailwinds in the form of just a good global markets generally, because our index was up 16.6% and we ended up 21.7%. And that's on the back of, on the public market side, value add from our long-only managers. But also, we have, as you might have read the report, or might have known, historically, we do have a program where we port hedge funds on top of our public portfolio, and there was a lot of value that came out of that piece as well.
The obvious headwind was what we saw in private equity from a relative value perspective, at least benchmark. Although even in that space, we were above zero and, frankly, within shouting distance or above and below most of our peers. So it's not like I'm looking at private equity saying: "Wow, they really didn't perform well." We were on the same ride as everybody during the year, and the other asset classes were a little more sort of benign, whether it be nominal bonds or the TIPs portfolio. You know, neither one had a huge impact. I know it was the story of the equity bit.
I noted the 510 basis points outperformance in Public Equity was quite impressive and asked Kevin whether the portable alpha strategy they use there to invest in external hedge funds is roughly 10% of assets.
He replied:
We don't report on leverage levels, specifically Leo. Your impressions, though, are not misplaced. I would say just to be clear, the impact of the leverage that comes with a portable alpha strategy is something that we do in addition to the strategy itself, and the managers that we put in the portfolio are really conscious of the potential impacts of leverage, and the knock-on effect from a liquidity perspective, and we're very comfortable that our leverage is modest at the plan level.
It may be the case that they use "modest leverage", but just to be clear, no other peer group outperformed its Public Equity benchmark by 510 basis points last year or anywhere close to that, and they all invest in external hedge funds as well.
The reason? Other funds report absolute return activities separately, and they report their leverage level, whether or not it's moderate.
If CAAT Pension Plan is mixing portable alpha with their long-only equities and calling it added value, then their benchmark needs a premium to reflect leverage and a T-bill hurdle.
That's not to take away from their portable alpha strategy which delivered exceptional returns last year. I'm just stating how it needs to be properly reported separately (you measure beta with beta and alpha with alpha and if you mix them up, your benchmark has to reflect this and a premium should be added to it).
Alright, we moved on to private markets where I asked Kevin to give me some more flavour on private equity, infrastructure and real estate.
He replied:
I'll try and do a fly by those categories because there are new ones. What I would say that prevails across the peak is that we try and pick great GPs globally, across the strategies, and leverage as much co-investment alongside those GPs as we can.
I think we've been pretty careful in varying degrees, quite frankly. In infrastructure, a lot of the portfolio is in co-invest in direct and in descending order, private equity, an order of magnitude lower, although it's still a significant portion of that portfolio.
Real Estate, even lower again, just by virtue of where our journey had been in that class. We were, for a very long time focused on open-ended funds, and we've more recently, started diversifying that strategy to closed-end GPs, and have started to attract more co-invest deal flow, so that will grow over time.
And in private credit, given the duration of those investments and the return profile we have not, and the relative newness of that portfolio, and frankly, the co-investments we see in private credit would be relatively small inside. We've not been active in co-investing in that space. So, private credit, we are not active co-investors at this point.
And from a strategy perspective, all four of the asset classes, private equity, private credit, real estate and infrastructure, all global in nature, funds and co-investments (in three of them). Private equity, the portfolio more mid-market focused, I would argue, and infrastructure we're diversified across the cap spectrum. Although in recent years, we've tried to make a more concerted effort to go down into more mid-market space. We're seeing more mid-market deal flow, because honestly, some of the GPs that we hired many years ago, have drifted into the large cap space. And while they've been good partners from a diversification perspective and from wanting to be known that we are still important to that GP as we would be, we've sort of certified and gone more down market, and we've seen success in that, particularly in attracting co-investment deal flow in real estate, as I noted, we have more recently started.
We are global on that side, not much Asia on the private market side, which is where, basically where all our real estate comes from but certainly well diversified, diversified across North America and Europe in real estate, and starting to see a lot more and more, probably minute small market there. We're starting to see co-investment deal flow that we've been executing on in that base and private credit, it's also a global program, but mostly North America and Europe, and again, not a lot co-investment in that portfolio at this point, and it's still in relatively early stages.
I asked him if the split between fund investment and co-investments is 60/40 and he replied:
We don't disclose that publicly, but I say that across real estate, or, sorry, across infrastructure and private equity on an aggregate basis, Leo, you're within shouting distance with that number.
He added that co-investments are a "huge driver of their long-term success" and CAAT Pension Plan wants to remain a strategic partner of choice to top GPs in the areas they invest in.
I also asked him, with the markets being so volatile this year, how does he manage to be Acting CEO and CIO? He replied:
No, I don't feel overwhelmed. Leo, I would say, at good fortune, as did Asif and Julie before him, for many years to be surrounded by a really good team.
The team has, over the last few years, has grown out significantly. We've got 20 on the investment side, which wouldn't have been the case a decade ago under Julie's stewardship.
We're well served by having built really deep bench strength, and that has been a tremendous support to me, as you might imagine.
In recent months, I have been very busy, but it's not like my eye is off the CIO ball. Everything that's coming forward, I'm spending time with, whether it be Razvan Tonea who's heading the public market side, or Adam Buzanis who's heading the private market side. I'm still in regular dialogue with them.
I would say, honestly, I'm dealing with it by spending more hours a day working. So my work days are longer than they used to be.
Lastly, since Kevin is a private markets experts, i asked him how he sees things going forward and whether he is concerned something structural is going on there.
He replied:
I think that's a very reasonable question. As you know, that 2021 inflection point, a lot of us investing in private equity for call it a decade plus, that portion of the portfolio that was invested in the late teens and up to 2021 is definitely, with returns recently, and we're no different on that front, though.
But these things, as you're likely aware are very end date sensitive. So to the extent that our numbers relative to benchmark in 2025 were not spectacular, look back three or four years ago, and granted, the impact of some of the teen stuff wouldn't have weighed on us at that point, but our numbers look fantastic when you look back.
We think things are cyclical, and that's why it is important for us to sort of maintain our focus on the long-term plan level. But even in private markets, because our private equity return over the last 10 years is certainly very strong.
Kevin is right, over a longer period, private equity portfolio at CAAT and other large Canadian pension funds has performed exceptionally well.
Alright, we left it off there, I once again want to thank Kevin for taking some time to cover CAAT pension Plan's 2025 results with me and recommend you all read the annual report here (it is very well written).
I also want give Asif Haque the credit he deserves for CAAT Pension Plan's strong performance this year.
It sure was a strange few months at CAAT Pension Plan, but I remain confident the Plan is on more solid footing now, and I agree with Kevin, there's solid bench strength there nowadays.
Below, a guide to CAAT's "My Pension" portal and how members can use it.
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