How XEQT Compares to Canada's Biggest Pension Funds: CPPIB, OTPP, and Caisse de dépôt

Last Thanksgiving, my uncle – a retired teacher with a comfortable pension – looked across the table and said, “You kids and your ETFs. The pension fund managers know what they’re doing. Why would you try to do it yourself?”

It’s a fair question. Canada’s pension funds are genuinely among the best in the world. The Canada Pension Plan Investment Board (CPPIB), the Ontario Teachers’ Pension Plan (OTPP), and the Caisse de dépôt et placement du Québec manage hundreds of billions of dollars, employ armies of PhDs, and have access to investment opportunities that retail investors can only dream about.

So why would anyone buy a simple all-in-one ETF like XEQT instead of trying to replicate what the pension funds do?

The answer surprised me. And it might surprise you too.

1. What Canada’s Pension Funds Actually Hold

Before we compare, let’s look at what the big pension funds actually invest in. Most people assume pension funds are just giant stock portfolios. They’re not. They’re far more complex – and that complexity is both their strength and their weakness.

Canada Pension Plan Investment Board (CPPIB)

The CPPIB manages over $600 billion on behalf of all Canadians (except Quebec). Here’s a rough breakdown of their asset allocation:

The CPPIB’s 10-year annualized net return has been approximately 10-11%, which is excellent by any measure. But notice something: less than a third of the fund is in public stocks. The majority is in private equity, infrastructure, and real estate – assets that retail investors simply cannot access.

Ontario Teachers’ Pension Plan (OTPP)

OTPP manages roughly $250 billion and has one of the best long-term track records of any pension fund in the world.

OTPP’s long-term annualized return has been roughly 9-10%.

Caisse de dépôt et placement du Québec (CDPQ)

The Caisse manages about $450 billion for Quebec’s pension and insurance plans.

CDPQ’s long-term annualized return has been approximately 8-9%.

2. The Performance Comparison (And Why It’s Tricky)

Here’s where things get interesting. Let’s line up the numbers:

At first glance, the pension funds look comparable to or slightly better than XEQT. But this comparison is deeply misleading for several reasons:

Different risk profiles. XEQT is 100% public equities. The pension funds hold 60-70% in private and alternative assets with lower volatility. Comparing them directly is like comparing a sports car to an SUV – they’re built for different purposes. The pension funds are designed to meet specific future obligations with controlled risk. XEQT is designed for maximum long-term growth.

Survivorship bias. Canada’s pension funds are famously well-run. We’re comparing XEQT to the best pension funds in the world, not the average one. Many pension funds globally underperform simple index funds.

Time periods matter. Private equity and infrastructure have performed exceptionally well in the low-interest-rate environment of the past decade. That may not continue. Public equities have had their own strong run. The relative performance of these asset classes shifts over long cycles.

Access costs. You can buy XEQT for 0.20% per year on a platform with zero trading commissions. The pension funds’ internal costs are low by institutional standards, but they employ thousands of people, maintain offices worldwide, and spend hundreds of millions on management.

3. What Pension Funds Can Do That You Can’t

Let’s give credit where it’s due. Canada’s pension funds have genuine advantages that XEQT investors will never have:

Private equity access. CPPIB can buy significant stakes in private companies, negotiate board seats, and influence management. When they invested in Petco, Merlin Entertainments, or highway toll systems, they were accessing returns unavailable on any stock exchange. Retail investors can’t do this.

Infrastructure ownership. OTPP literally owns airports, highways, and water utilities. These assets generate stable, inflation-linked cash flows over decades. You can’t buy a slice of Highway 407 on Wealthsimple.

Direct real estate. The Caisse owns office towers, shopping centers, and logistics warehouses directly. The returns from direct ownership (no REIT management fees, no public market discount) are structurally better than what you get through publicly traded REITs.

Leverage and derivatives. Pension funds can use leverage and sophisticated hedging strategies at institutional borrowing rates (near the risk-free rate). Retail investors pay much higher rates and have fewer tools available.

Negotiating power. When CPPIB invests $2 billion in a private company, they negotiate terms, protections, and governance rights that make the investment fundamentally different from buying shares on the open market.

Long time horizons without behavioral risk. A pension fund won’t panic-sell during a crash. They have actuarial models, boards of trustees, and investment committees that enforce discipline. Individual investors have… themselves.

4. What You Can Do That Pension Funds Can’t

Here’s the part that surprised me most when I dug into this. XEQT investors actually have several structural advantages over the pension funds.

No liability matching. Pension funds must match their investment returns to their future obligations – they need to pay teachers, retirees, and beneficiaries on specific dates. This forces them into lower-return assets (bonds, fixed income) that reduce their overall growth. You have no such constraint. If you’re 30 years from retirement, you can hold 100% equities and ride out any volatility.

Zero liquidity constraints. CPPIB’s private equity holdings are illiquid – they can’t sell a highway or a private company quickly without accepting a discount. Your XEQT shares can be sold in seconds at market price on any trading day.

Tax advantages they don’t have. Pension funds don’t benefit from TFSAs or RRSPs – they have their own tax treatment. But you, as an individual investor, can shelter your XEQT returns completely from tax in a TFSA, or defer taxes in an RRSP. A TFSA holding XEQT is one of the most tax-efficient investment structures available to any Canadian.

Lower costs on the public equity portion. CPPIB’s internal management costs are low by institutional standards (roughly 0.30%), but that’s still higher than XEQT’s 0.20% MER. For the portion of their portfolio that’s in public equities – which is essentially what XEQT replicates – you’re doing it cheaper.

No bureaucracy. Investment decisions at CPPIB go through committees, boards, and governance processes. You can decide to increase your XEQT contribution at 11pm on a Tuesday night while eating cereal. Agility has value.

Full portability. You can transfer your XEQT between brokers, between accounts, between life stages. A pension is tied to your employer, your province, or your specific plan. Try taking OTPP with you when you leave teaching for a career change.

5. The Real Lesson: They’re More Similar Than You Think

Here’s what most people miss when comparing XEQT to pension funds: on the public equity side, they’re doing nearly the same thing.

CPPIB’s public equity portfolio is essentially a global equity index with some active tilts. OTPP’s public equity allocation broadly tracks global market-cap weights. They might use some factor exposure, some active selection, and some smart beta, but the core is remarkably similar to what you get in XEQT.

The difference is that pension funds diversify beyond public equities into private markets, infrastructure, and real estate. That diversification has historically reduced volatility and improved risk-adjusted returns. But in terms of raw total returns, a 100% global equity portfolio like XEQT has been remarkably competitive.

Here’s a thought experiment:

If CPPIB allocated 100% to public equities (which they would never do, because they have obligations to meet), their return profile would look a lot like XEQT. The private equity, infrastructure, and real estate premiums add roughly 1-2% per year over public equities – but they also come with illiquidity, complexity, and operational costs that eat into that premium.

The bottom line: XEQT gets you 80-90% of the pension fund experience for 0.20% per year and zero complexity. The remaining 10-20% comes from asset classes you simply can’t access as a retail investor, and the performance gap is smaller than most people assume.

6. Geographic Allocation: How the Strategies Compare

One area where XEQT and the pension funds genuinely diverge is geographic allocation:

The pension funds allocate significantly more to emerging markets and international developed markets, and less to the U.S. compared to XEQT. They also tend to have lower Canadian allocations (except CDPQ, which has a mandate to invest in Quebec).

This reflects a key philosophical difference. The pension funds are actively making geographic bets based on their research and outlook. XEQT roughly follows market-cap weights with a Canadian home bias. Neither approach is objectively better – it depends on which regions outperform over the next few decades.

7. Fees: The Silent Advantage

This is where XEQT wins convincingly.

Pension funds have internal management costs, performance fees on private investments, transaction costs, and operational overhead. The total cost of managing CPPIB’s portfolio is estimated at roughly 0.30-0.50% when you include all costs. OTPP and CDPQ have similar internal cost structures.

But here’s the thing: if you tried to replicate what a pension fund does by buying private equity through retail channels, the costs would be astronomical. Private equity funds charge “2 and 20” (2% management fee plus 20% of profits). REITs charge management fees. Infrastructure funds charge management fees. The retail version of a pension-fund-style portfolio would cost you 1-2%+ per year, easily.

XEQT costs 0.20% per year, period.

You can’t replicate a pension fund exactly. But the public equity portion – which is the part available to you – is cheaper through XEQT than through almost any other channel.

8. The “No Pension” Problem – and How XEQT Solves It

Here’s the uncomfortable reality: most Canadian workers don’t have a defined benefit pension. According to Statistics Canada, only about 37% of Canadian employees have any employer-sponsored pension plan, and that number is declining.

If you don’t have a pension, your retirement depends entirely on:

• CPP/QPP (maximum benefit of roughly $17,000-$18,000/year in 2026)
• OAS (roughly $8,000-$9,000/year)
• Your own savings and investments

That’s roughly $25,000-$27,000/year from government programs. If your living expenses are higher than that (and for most people, they are), the gap needs to come from somewhere.

XEQT in a TFSA and/or RRSP is how you fill that gap. It’s your DIY pension fund.

The math:

If you need $50,000/year in retirement and government programs cover $25,000, you need your portfolio to generate the remaining $25,000. Using the 4% withdrawal rule, that requires a portfolio of roughly $625,000.

Is that achievable? With consistent contributions to XEQT over 25-30 years, absolutely. It’s not easy, but it’s straightforward.

9. What Would a Pension Fund Manager Think of XEQT?

I’ve spoken with people who work in institutional investment management, and their perspective on all-in-one ETFs like XEQT is surprisingly positive.

The consensus: for individual investors, it’s hard to do better.

Here’s why. The advantages that pension funds have – private equity access, infrastructure, leverage, negotiating power – are institutional advantages that don’t scale down to individual investors. When you try to replicate them at a retail level, you end up paying enormous fees for inferior versions of the same thing.

The things that XEQT does – broad global equity diversification, low cost, automatic rebalancing, tax-efficient structure – are exactly what a pension fund manager would recommend if you asked them how a regular Canadian should invest.

One portfolio manager put it to me this way: “If I couldn’t work in institutional investing and I had to manage my own retirement? I’d buy XEQT in a TFSA and an RRSP and go live my life. That’s literally what I’d do.”

10. The Bottom Line

Canada’s pension funds are world-class. They deliver strong returns through strategies and asset classes that retail investors can’t access. But XEQT delivers remarkably competitive returns at a fraction of the cost, with full liquidity, tax advantages, and zero complexity.

You don’t need a pension fund manager. You need discipline, time, and a single ETF.

My uncle still doesn’t agree, but his pension check shows up every month regardless of what he thinks about ETFs. For the rest of us who aren’t so lucky, XEQT is the next best thing.