The funded status of the Segal Group Inc.’s model multi-employer pension plan fell from 95 per cent to 86 per cent during the first quarter of 2020, according to a new report by the firm.
The model’s portfolio is comprised of 55 per cent equities and 45 per cent bonds. Overall, its investments saw dismal performance, with domestic equities measured by the S&P/TSX composite index posting negative 21 per cent returns, U.S. equities measured by the S&P 500 down 12 per cent and international stocks included in the MSCI EAFE index dropping 15 per cent. Domestic fixed income, as measured by the FTSE Canada bond universe, was the only asset class to see gains, posting two per cent.
The coronavirus pandemic put huge pressure on asset prices during the quarter, but the oil price war that developed between Russia and Saudi Arabia also played a role.
With so many Canadians unable to be physically present at work, all industries saw a decline in hours worked. The report noted that decline could affect a MEPP’s costs. “A reduction in the hours worked will affect the plan’s ability to cover fixed costs. This risk is magnified when a plan is dependent upon future contributions to pay down its unfunded benefit obligations.”
Some industries saw bigger declines than others, said the report, noting construction hours worked were down 10.7 per cent, transportation and warehousing down 13 per cent, manufacturing down 7.4 per cent and utilities down just 3.3 per cent.