Canadian defined benefit pension plans experienced a modest third quarter, according to separate reports by BNY Mellon Asset Management Canada Ltd. and Northern Trust Corp.

The 87 plans included in BNY Mellon’s tracking service saw a 0.55 per cent return in the third quarter of 2017. Those tracked by Northern Trust saw a negative 0.7 per cent return during the same period.

Read: Canadian DB plans posted median gain of 5.3% in 2016: report

“The two interest rate hikes in the quarter resulted in a negative impact on the returns of pension plans,” said Arti Sharma, president and chief executive officer of Northern Trust in Canada, in a press release. “Pension plans with longer duration bonds underperformed as the yield curve rose over this period. Despite the weaker results experienced this quarter, Canadian pension plans continue to enjoy a healthy return of 4.4 per cent year to date.”

BNY Mellon’s data shows a one-year return of 6.1 per cent. It also indicated that 70 per cent of plans posted positive results. “The top-performing asset class in the third quarter is Canadian equities with a median return of 3.4 per cent,” said Catherine Thrasher, managing director of global risk solutions for Canada at BNY Mellon.

Read: Equity markets help raise Canadian pension plan returns: research

According to BNY Mellon, international equity was the best-performing asset class over the one-year time period, returning 14.74 per cent. Fixed income underperformed in the third-quarter and one-year time horizons with median returns of minus two per cent per cent and minus three per cent, respectively.

Northern Trust noted that despite escalating tensions with North Korea and the economic impact caused by natural disasters, unrelenting optimism continues to boost U.S. equity markets. As measured by the S&P 500 index, U.S. equity markets gained 0.6 per cent in the third quarter, marking the sixth consecutive quarter of positive returns.

European equities, meanwhile, rose 2.5 per cent, boosted by stronger investor confidence and expectations of a tighter monetary policy from the European Central Bank, according to Northern Trust.

Read: Rising bond yields push DB pension solvency to 99.3% in third quarter: survey

Adding to the mix of reports on pension plan performance, the Segal Group Inc. released data on Thursday showing the funded status of its model multi-employer pension plan increased by four percentage points last quarter to 101 percent. The increase was primarily due to a four per cent drop in liabilities, as the overall investment return of the model plan’s portfolio was almost zero.

Copyright © 2018 Transcontinental Media G.P. Originally published on benefitscanada.com

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