As global equities overcame inflationary fears and continued an upward trend, Canadian pension plan investment returns increased during the second quarter of 2021, with the median plan returning 4.1 per cent, according to Northern Trust Canada’s pension universe.
“The course of the pandemic has certainly taught us attributes about strength and adaptation, fundamentals we can all relate to,” said Katie Pries, president and chief executive officer of Northern Trust Canada, in a press release. “These key components continue to build on the foundation of Canadian pension plans today, a testament to their longevity and long-term sustainability.”
Canadian equities were up 8.5 per cent for the quarter, led by strong double digit returns from the information technology, energy, real estate and communication services sectors, while U.S. equities generated 6.9 per cent in Canadian dollars for the quarter, with the same sectors posting the strongest results.
In Canadian dollars, international developed markets generated 3.8 per cent for the quarter, while emerging markets advanced 3.6 per cent for the same period.
Another report, LifeWorks Inc.’s performance universe of pension managers’ pooled funds, showed a median return of 5.2 per cent before management fees and 7.2 per cent since the beginning of 2021.
“The financial position of pension funds has improved since the start of the year,” said Jean Bergeron, partner for the investment and risk consulting team at LifeWorks. “We estimate that the solvency ratio of an average pension fund increased by around nine cent in the first two quarters of the year.”
In the second quarter of 2021, the median return for Canadian equity managers was 7.7 per cent, 0.8 percentage points lower than the 8.5 per cent posted by the S&P/TSX index, according to the report. The S&P/TSX small-cap index gained 9.2 per cent, while the S&P/TSX completion index — representing mid-cap stocks — increased 6.9 per cent and the large-cap S&P/TSX 60 index grew by nine per cent.
Foreign equity managers’ median returns, alongside the appropriate benchmark index returns, were also up. In Canadian dollars, returns for U.S. equities were 6.8 per cent compared to seven per cent for the S&P 500 index; international equities were 3.6 per cent versus 3.6 per cent for the MSCI EAFE index; global equities were 5.6 per cent next to 6.2 per cent for the MSCI world index; and emerging market equities returned 1.8 per cent compared to 3.6 per cent for the MSCI emerging markets index.