The median Canadian pension plan returned 4.8% for the third quarter and has gained 8.4% year to date through Sept. 30, according to the Northern Trust Canada universe, which tracks defined benefit plans in Canada.
The third quarter was marked by volatility triggered by events such as elections in the U.K. and France, the Bank of Japan's “hawkish policy narrative,” periodic selloffs across the technology sector and “pockets of weak economic data,” all of which weighed on investor confidence, an Oct. 24 Northern Trust news release said.
Nonetheless, most major central banks continued to focus on the fundamentals underpinning the economy, particularly inflation, which continued to decline across most developed regions, leading monetary policymakers to maintain or embark upon a less restrictive tone. For example, the U.S. Federal Reserve cut rates by 50 basis points on Sept. 18.
Although the financial markets endured pockets of volatility during the third quarter, Northern Trust noted in the release, both equities and bonds welcomed this monetary policy shift along with the announcement of China's massive stimulus package and finished the quarter with solid positive performance.
"As major central banks around the globe seek a path to neutrality, Canadian pension plans remained in solid financial form supported by healthy solvency ratios,” said Katie Pries, president and CEO of Northern Trust Canada, in the release. “Throughout the interest rate journey, plan sponsors exercised vigilance through the lens of balancing risks and adopting sound strategies that position plan investments for a successful and sustainable retirement future."
During the third quarter, Canadian equities, as measured by the S&P/TSX Composite index, surged 10.5%; while U.S. equities, as measured by the S&P 500 index, returned 4.5%. Meanwhile, international developed equities, as measured by the MSCI EAFE index, returned 6% for the quarter; while the MSCI Emerging Markets index returned 7.5%.
The Canadian fixed-income market, as measured by the FTSE Canada Universe Bond index, advanced 4.7% for the quarter as provincial bonds saw the strongest gains followed by corporate and federal bonds.
The Northern Trust Canada universe tracks the performance of Canadian institutional defined benefit plans that subscribe to performance measurement services as part of Northern Trust’s asset service offerings.
Northern Trust Canada is a subsidiary of Northern Trust Corp., which had assets under management of $1.6 trillion as of Sept. 30.