Canadian Pension funds have started to shy away from real return bonds as continued low interest rates harm their return potential.

Ontario Teachers" Pension Plan CEO Claude Lamoureux said the asset class was traditionally seen as an ideal way to protect against inflation.

"We were invested heavily in (real return bonds) in the past, because in the 1990s they were issued in the 4-5% range, but for such a long way they have only seemed to go in one direction - down", he said. "Now the return is not as attractive, so we will look to asset classes with the same characteristics, like real estate and infraestructure", he said.

Canada Pension Pln communications manager John Cappelletti said there was "limited potential" in the asset class at present, and agreed funds would be better off looking to real estate and infraestructure.