TORONTO--(BUSINESS WIRE)--Canadian defined-benefit pension plans recorded a median gain of 5.3 percent in 2016, according to the Northern Trust Canada Universe.
The Northern Trust Canada Universe tracks the performance of Canadian institutional investment plans, which subscribe to performance measurement services as part of Northern Trust’s asset servicing offerings.
The median plan lost 1.2 percent in the quarter, the first negative median quarterly return since the third quarter of 2015. The driver of the reversal was an uptick in bond yields which had a negative impact on bond returns.
The Canadian fixed income segment lost 3.4 percent for the quarter as measured by the FTSE TMX Bond Universe, with short and mid-term issues outperforming long-term issues in the quarter by a wide margin. The TR Canadian Corp 10-20 Year index lost 4.3 percent and the TR Canadian Government 7-10 Year index lost 5.3 percent.
Equity markets in global developed markets rose following the U.S. presidential election. Canadian stocks, riding strong returns in financial and energy companies, returned 4.5 percent for the quarter as measured by the S&P/TSX Composite.
While the U.S. and international developed equity markets posted positive returns in the fourth quarter, emerging markets fell due to a U.S. rate hike, fear of protectionist trade policies, and a strengthening U.S. dollar.
“The net gain in pension returns coupled with rising bond yields had a positive impact on Canadian pension funding levels in 2016,” said Arti Sharma, head of Northern Trust Canada. “As pensions steer their investments through uncertain markets, it is increasingly important that they are equipped with relevant and timely data coupled with appropriate analytical and investment solutions.”
Notable trends in the quarter included:
- Canadian fixed income returns of -6.8 percent outperformed the FTSE TMX Long Overall Bond index returns of -7.54 percent in the fourth quarter.
- Canadian fixed income returns of -6.81 percent underperformed the FTSE TMX Universe Canadian bond index returns of -3.45 percent in the fourth quarter.
- Canadian equity returns of 4.27 percent slightly underperformed the S&P/TSX Composite index returns of 4.54 percent in the fourth quarter.
- Global equity returns of 2.56 percent underperformed the MSCI World index returns of 3.93 percent in the fourth quarter.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has offices in the United States in 19 states and Washington, D.C., and 22 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of December 31, 2016, Northern Trust had assets under custody of US$6.7 trillion, and assets under management of US$942 billion. For more than 125 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit northerntrust.com or follow us on Twitter @NorthernTrust.
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