2026 Top 40 Money Managers Report: How is the rise of commodity investments servicing pension funds?
According to its 2025 mid-year results, the Ontario Teachers’ Pension Plan’s total fund return for the first half of the year was predominantly driven by its public assets, particularly gold. The asset continues to be a component of the pension fund’s inflation-sensitive asset allocation and supports both portfolio diversification and inflation protection, says Steve Saldanha, its executive managing director of total fund management.
Read: Ontario Teachers’ returns 2.1% in first half of 2025, net assets rising to $269.6 billion
“Commodities remain an important part of our overall asset mix because they can help manage inflation risk and contribute to portfolio balance across different economic conditions. We’ll [continue to] evaluate commodities in the context of the total fund, alongside other inflation-sensitive assets, based on market conditions and our long-term risk and return objectives.”
Indeed, as of June 30, 2026, inflation-sensitive assets represented approximately 18 per cent of net investments in the Ontario Teachers’ portfolio, with commodities making up 10 per cent and representing $30.1 billion. Gold and other commodities support the pension fund’s mission to deliver retirement security for its members by diversifying the portfolio and supporting it during periods of higher inflation, says Saldanha.
“This is important for a pension plan with long-dated and inflation-linked obligations, where preserving purchasing power over time is critical. By in-vesting across a broad range of asset classes, we aim to support pension payments over the long term.”
Read: Are institutional investors returning to commodities?
When looking at the cyclicality of commodities, pension plan sponsors tend to err on the side of speculation, says Devin Forbes, associate director of investment consulting at Eckler Ltd. “Pension plans wouldn’t necessarily have, by design, a large allocation to commodities because timing cycles becomes difficult and we can’t add that much risk to portfolios [when] we’re managing people’s retirement money.”
However, he suggests plan sponsors access commodities through two different avenues: indirectly by investing in Canadian commodity companies, alternatives such as hedge funds, private equity or private debt via new mine financing, for example; or directly through commodity exchange-traded funds.
“Almost all pension mandates within Canada have an allocation to Canadian equities, but I would term that as indirect allocations via Canadian equities and that’s how Eckler has allocated to commodities via our Canadian equity managers.”
The rise of gold
As an asset, gold doesn’t exactly have a defined valuation methodology, says Forbes.
“There are links to gold’s price relative to real yields [and] demand from central banks. There’s also the link to the dollar because it’s denominated in [U.S. dollars]. Increases in U.S. dollars tend to hurt gold asset prices and vice versa. There’s the geopolitical angle and safe haven status, so gold has many different avenues of being valued.”
The concerns around the U.S. dollar being the reserve asset of the world has created a push for central banks to increase their gold reserves as backing for the currency and longevity going forward, he adds. “Gold is increasing in value, along with other precious metals, due to the fact that we’ve gone through an extended period of time — over the last five to 10 years — with a very low level of new production and exploration coming online. “When demand increases like we’ve seen over the last two years, with production not being able to tick up, it’s created this massive divergence and increase in price.”
Central banks have been a key part of the rise in gold, starting in 2022 when Western sanctions froze Russian assets in response to its attack on Ukraine, says Grant Johnsey, head of market solutions for the Americas at Northern Trust.
This prompted China and other central banks to diversify away from U.S. treasuries as their default reserve asset, leading to a rise in the amount of central gold they were buying. While U.S. debt has tripled since 2013, central banks’ aggregate holdings of U.S. treasuries have declined over the same period, he adds.
“You see this market shift out of treasuries as a reserve asset and into gold. Underpinning that is the fact that gold has . . . also been added as a tier one reserve asset by the Bank of International Settlements, so it’s considered at the same level of quality of reserve as U.S. dollars and treasuries. And to my know-ledge, it’s the only other tier one asset out there.”
Gold is slightly different from other commodities in the sense that it often behaves more like a currency than a commodity, says Rick de los Reyes, head of commodities at T. Rowe Price. “It’s really viewed more as a financial store of value. It doesn’t have a lot of industrial purpose, so when you see gold moving, it’s usually more of a function of the impact of interest rates, rising money supply and monetary inflation.”
The positive tailwind behind gold is mainly related to currency debasement, debt deficits and the amount of money creation, he adds, but the negative tail-wind is the inflation that all of that stimulus is causing, as it will lead to higher interest rates — which is bad for gold.
Key takeaways
• Gold’s recent increase in value, along with metals like copper and uranium, has resulted in a steady rise in validation for commodities as an asset class.
• Experts expect commodity prices to stay eleva-ted because the current capital expenditure cycle in terms of production is the most significant one in the last five to 10 years.
• However, institutional investors should consider their investment horizon because of the nature in which the asset class trades.
Ryan Crowther, portfolio manager at Franklin Templeton’s ClearBridge Investments, says gold has become more of a substantial asset class largely due to its durability. “Also, given what we saw with the emergence of cryptocurrencies over the past couple of years, which some speculated might displace gold in terms of what it provides as an uncorrelated asset class, I think we can now firmly make the case that gold has reestablished itself as a go-to asset class.”
Why commodities are gaining traction
Across the board right now, investors are seeing a lot of commodities rising in value relative to fiat currencies, says Johnsey, referring to government-issued money that isn’t backed by a physical commodity like gold or silver.
“Commodities move in cycles and waves — they don’t trade like stocks or bonds; they trade much more on an equilibrium basis. . . . Commodity pricing is ultimately matching supply and demand for it, unlike bonds, for example. You can do present value capital work to determine what the value of a stock or a bond is.”
Read: Domestic energy investment opportunities growing in Canada: IMCO
Within these commodity cycles, he adds, there are ebbs and flows where commodities are often overproduced and become cheaper, so production and supply decreases. “You see this a lot with any commodity, but especially in the energy markets. Whether it’s refineries, more oil and gas drilling or pipeline construction, they often overshoot the mark, so you end up with a period of low prices. We haven’t seen commodities perform markedly well since the years leading up to the [2008/09] financial crisis.”
Commodity investing is also impacted by weakening currencies and expanding energy markets, says Johnsey, noting the move to more renewable energy is obviously expensive. “Building . . . wind turbines and solar panels — that all puts demand on aluminum, copper, iron. Because we’ve come out of a period where commodity prices didn’t perform well, . . . there’s less production and availability and now you have the confluence of weaker currencies. The supply has to catch up with demand.”
In terms of the commodities represented in the Canadian equity market, Crowther says investors have seen quite a lift across the board. “We’ve had a big resurgence in copper, [largely due to] the push to electrify globally. Structurally, copper is becoming tougher and tougher to find, . . . so over time the supply/demand imbalance has only gotten worse for copper. Large-scale mines are being built in more remote places, people are having to dig deeper. With all those things, the path of least resistance becomes higher because you have higher costs driving the economics.”
Read: Expert panel: How mobilizing institutional capital can create a more resilient Canada
Uranium is another commodity that has had strong supply/demand fundamentals for a long time, but with the heavy focus on the buildout of data centres, the demand for uranium has become more urgent, he adds. “That’s important for Canada because we have some of the world’s best assets when it comes to uranium and we also have companies that are equipped financially and technologically to build out that infrastructure.”
However, Crowther warns that volatility is also an important consideration when investing in commodities. “We’re trying to vet the businesses more based on the idea that they’re price takers and that they’re aware this volatility comes with the territory, so they need . . . their businesses to be durable through the ups and downs of the gold cycle.”
He also cautioned that volatility will continue to be a double-edged sword, noting that, as fast as the market saw gold rise from $2,000 to more than $5,000, it could easily move in the other direction. “We’ve been through markets [with] depressed prices for uranium, copper and gold and the conversations with clients were more around which companies can weather the storm the best and have durable assets and businesses.”
Another big concern for commodity investors is the current geopolitical tensions and conflict in the Middle East, says de los Reyes. “The mistake I see [investors] making is they’re very focused on crude oil, when in reality they should be more focused on refined products like gasoline and diesel.”
While there has been some success in moving crude oil supply through the Strait of Hormuz after the closure, he notes, the bigger issue is the number of refineries in both the Middle East and Russia that have been severely damaged. “Even if you get the oil out, . . . it [still] has to be refined into gasoline, so you need to pay attention to gasoline and diesel prices, as well as crack spreads, which is the refining margin that the refiners get for buying oil and turning it into gasoline or diesel — that’s where the real issue is.
“A lot of the discussions I’ve had with clients lately is making sure they understand the bigger issue is in refined products. If we’re going to go into a recession, it’s likely going to be because there’s not enough diesel [as opposed to] not enough oil.”
On the horizon
Forbes expects commodity prices to stay elevated since there hasn’t been a significant commodity capital expenditure cycle in the last five to 10 years. “We need this commodity cycle along with commodity inputs into the [artificial intelligence] race.”
Indeed, while the current cycle appears to be in its early days, Johnsey says the ongoing trade wars will likely cause a stockpiling of critical commodities. “Historically, [these commodity cycles] have been five or six years in length and we’re in year two or three, so it would appear as though there are more legs to this.”
Read: Expert panel: A look at commodity price behaviour over the business cycles
With the confluence of reindustrialization, electrification, the shift to green energy and the cost of fertilizer, there seem to be more tailwinds behind this commodity cycle, he adds. “You have to look at these trends not just in the very narrow sense of how commodities produce and trade but [also how the politics and tensions] we’re facing worldwide are playing out.”
Johnsey advises institutional investors to be careful investing in commodities because every commodity eventually has to get cheaper or be replaced. “You never want to just stay in commodities from a long-term investment standpoint; you’ve got to pick your spots because, ultimately, if a commodity doesn’t get cheaper as an input over time, a substitute will eventually be found.
“That’s important to underscore, because it’s not the sort of investment where you just buy it, set it and forget it. You have to really think about your investment horizon with commodities because of the very nature in which they trade.”
Sadie Janes is an associate editor at Benefits Canada and the Canadian Investment Review.
Download a PDF of the 2026 Top 40 Money Managers Report.
