Canadian defined benefit plans posted positive returns in the fourth quarter, thanks to a rebound in global equity markets, following a sluggish third quarter, data from Northern Trust show.
The median Canadian DB plan returned 3.8% for the quarter ended Dec. 31, according to the Northern Trust Canada Universe, well above the nearly flat median 0.6% reported for the third quarter that primarily resulted from a softening of equity markets in September.
For the year, the median Canadian DB plan returned 8.4%, just below the median return of 10% recorded for the year ended Dec. 31, 2020.
"These are impressive results in the wake of a rapidly changing landscape. Canadian plan sponsors have adapted well as we advance through the pandemic, while transitioning through windows of uncertainty along the course," said Katie Pries, president and CEO of Northern Trust Canada, in the news release. "This adaptability has revealed the strength and resilience of Canadian pension plans today, as evidenced by their solid investment returns. As pension plans continue to harness this resilience, they will be well positioned, shaping the path for future prosperity."
Canadian equities and U.S. equities returned 6.5% and 10.7%, respectively, in the quarter ended Dec. 31, as measured by their respective S&P/TSX and S&P 500 indexes. For the full year, Canadian equities returned 25.1%, while U.S. equities posted a full-year return of 27.6%.
The Canadian fixed-income market, measured by the FTSE Canada Universe Bond Index, gained 1.5% for the three months ended Dec. 31, but lost 2.5% for the year. The Bank of Canada kept its overnight interest rate at 0.25% in the fourth quarter and concluded its bond purchasing program in an attempt to maintain its 2% inflation target.