Pension managers’ pooled funds posted meagre returns in the third quarter of 2018, according to Morneau Shepell Ltd.’s performance universe.

Markets were less synchronized during the latter half of 2018, leading to more mixed results than earlier in the year, noted the report, which showed a median return of 0.4 per cent before management fees. However, this was 0.6 per cent higher than the benchmark, with 55 per cent in equity and 45 per cent in fixed income.

“Global stock markets delivered mixed returns in the third quarter with U.S. equities outperforming other major markets, with returns of 5.7 per cent in Canadian dollars for the S&P 500,” said Jean Bergeron, vice-president in Morneau Shepell’s asset management consulting team, in a press release. “It was a negative quarter for emerging market equities, returning -2.7 per cent in Canadian dollars, and Canadian equities returning -0.6 per cent. Bond returns in Canada were also negative in the third quarter, at about -1.0 per cent for the market as a whole.”

Read: Canadian DB pensions post positive, yet muted returns in second quarter

During the third quarter, pension fund managers saw a median return of negative 0.8 per cent on Canada bonds, which was still 0.2 per cent higher than the benchmark. Canadian equities, meanwhile, experienced a negative 0.3 per cent return, faring somewhat better than the S&P/TSX index’s 0.6 per cent drop. 

U.S. equities saw positive returns of 5.4 per cent, but still underperformed the S&P 500 index’s 5.9 per cent return for the quarter. International equities posted negative 0.7 per cent, while emerging markets saw negative 2.6 per cent returns.

“Although asset returns were negative, the decrease in actuarial liability was larger,” said Bergeron. “Pension fund financial positions on a solvency basis thus improved for the third quarter of 2018. The solvency ratio for an average pension plan has improved by about 0.5 to 2.0 per cent since the beginning of the quarter.”

Read: Top 50 DC Plans Report: How plan sponsors can blend DB features into their DC pension plans

Northern Trust’s pension universe also saw flat returns for the quarter, with Canadian defined benefit plans giving back gains made in the first half of 2018.

“The median Canadian plan returned -0.1 percent for the third quarter, marking the first time pension quarterly returns slipped into negative territory in 2018,” said Arti Sharma, president and chief executive officer of Northern Trust Canada. “Global markets presented a mixed picture in the quarter, as U.S. equities reached new highs while non-U.S. equity markets lagged on the backdrop of uncertainty over the NAFTA negotiations, Europe’s political environment, U.S.-China trade tensions and a stronger U.S. dollar. Year-to-date, Canadian pension plans returned 3.1 per cent compared to 4.4 per cent over the same period in 2017.”

Read: B.C. launches consultation on new options for pension solvency funding

Copyright © 2021 Transcontinental Media G.P. Originally published on

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