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

Canada’s defined benefit pension plans posted a median return of 1.6 per cent in 2019’s third quarter, according to Northern Trust Canada’s pension universe.

“Despite a backdrop of persistent volatility, fear and uncertainty, Canadian pension plans displayed resilience in the third quarter,” said Arti Sharma, president and chief executive officer of Northern Trust Canada, in a press release. “Although returns moderated slightly from the previous two quarters, year-to-date the median pension plan remains in positive territory positioned at a healthy 11.3 percent.”

During the quarter, markets felt the tumultuous effects of U.S.-China trade negotiation developments, Brexit, escalating tensions between the U.S., Iran and Saudi Arabia, civil unrest in Hong Kong, the crash of Argentina’s Merval equity index and a temporary inversion of the U.S. yield curve. However, North American stock markets ended the quarter with solid gains, noted Northern Trust.

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Canadian equities, as measured by the S&P/TSX composite index, generated a 2.5 per cent return, with nine of 11 sectors concluding in positive territory, with utilities and real estate  turning out the strongest gains.

U.S. equities, measured by the S&P 500 index, posted a three per cent return, off the back of strong economic growth, mild inflation and high consumer confidence.

Measured by the performance of the MSCI EAFE index, international equities finished the quarter with a 0.3 per cent return after facing “political uncertainty, weak economic data, low inflation and ongoing trade concerns.” Emerging market equities, measured by the MSCI emerging markets index, were slumped through the quarter, posting a negative 2.8 per cent, with the pressure of trade tensions on emerging market currencies and the effect of the Hong Kong protests on the Asian markets.

Meanwhile, fixed income as measured by the FTSE Canada universe index returned 1.2 per cent for the quarter. Provincial and corporate bonds outperformed federal bonds, while long-term bonds surpassed short- and mid-term bond performance.

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