Canadian DB pension plans post 3.2% return in Q3: report

Canada’s defined benefit pension plans posted a 3.2 per cent return in 2020’s third quarter, a position augmented by strong global equity markets, according to Northern Trust Canada’s pension universe.

“The global pandemic has undoubtedly accelerated the pace of change for many defined benefit pension plans over the course of recent months, namely in the form of financial, regulatory, as well as technology transformation,” said Katie Pries, president and chief executive officer of Northern Trust Canada, in a press release.

“As pension plan sponsors embrace this evolution of change and the adaptation to a virtual work environment, they remain vigilant on preserving plan assets while generating investment results supportive of long-term sustainability and growth.”

Read: Canadian DB plans post 1.6 per cent median return in third quarter: survey

The third quarter saw equity markets weather the economic impact of the coronavirus pandemic with the support of government-funded stimulus, with growth further encouraged by progress in vaccine development, noted the report.

Canadian equities, as measured by the S&P/TSX composite index, generated a return of 4.7 per cent. All sectors posted gains with the exception of health care and energy.

U.S. equities also made gains with a new all-time high in September and a 6.8 per cent return for the quarter, as measured by the S&P 500 index. While the majority of sectors posted healthy gains, real estate remained flat and the energy sector retreated as a result of weaker oil prices.

While international equities posted a 2.9 per cent return, the MSCI emerging markets index produced a strong 7.6 per cent return, led by the consumer discretionary and information technology sectors.

Read: Canadian DB pension plans see rebound off strong equity gains: reports

And Canadian fixed income, as measured by the FTSE Canada universe bond index, posted a modest 0.4 per cent return for the quarter. Corporate bonds outperformed both the federal and provincial issuers, while mid-term bonds surpassed the short- and long-term segments.

In addition, Morneau Shepell Ltd.’s latest performance universe for pension managers’ pooled funds posted a median return of 4.4 per cent before management fees for the third quarter and 2.6 per cent since the beginning of the year.

Managers obtained a return of 0.9 per cent on bonds, while short-, mid- and long-term bonds posted returns of 0.7 per cent, 1.1 per cent and negative 0.3 per cent, respectively, it said. The high-yield bond index posted a return of 4.6 per cent, while the real return bond index saw a 4.4 per cent return.

Canadian and U.S. equities posted respective returns of 5.9 per cent and 6.6 per cent, while international, global and emerging markets generated returns of 4.9 per cent, 5.3 per cent and 8.4 per cent, respectively.

Read: 2019 a strong year for pension managers’ pooled funds: Morneau Shepell