TORONTO--(BUSINESS WIRE)--Canadian defined benefit plans witnessed a contraction in investment returns in the first quarter of 2020, according to the Northern Trust Canada Universe, finishing with single-digit losses at the median after enduring a historic period of market volatility and economic turmoil resulting from the global pandemic crisis.
“Canadian pension plans demonstrated resiliency during a period of extreme market stress, with the median plan in the Northern Trust Canada Universe posting a return of -7.1 percent for the first quarter -- a modest decline in light of the unprecedented conditions,” said Katie Pries, President and CEO of Northern Trust Canada. “In a volatile market riddled with fear, uncertainty and unpredictability, Canadian pension plan sponsors navigated through uncharted territory, seeking a path to safety for the health of their employees as well as the preservation of their retirement pensions.”
The Northern Trust Canada Universe tracks the performance of Canadian institutional investment plans that subscribe to performance measurement services as part of Northern Trust’s asset service offerings.
After a positive start to 2020, global markets were shaken by the economic impact of the novel Coronavirus as it rippled across the world during the first quarter, while escalating oil price tensions between the Middle East and Russia compounded the magnitude of the market decline. In response to the spreading coronavirus, health care policy directives included shutting down non-essential businesses, closing borders and instituting travel bans worldwide. Central Banks and policymakers around the globe have responded with unprecedented monetary policy measures and spending in an effort to curb the economic and financial damage as the pandemic continues to run its course. This was witnessed through emergency interest rate cuts, further rounds of quantitative easing which included new liquidity facilities, as well as extensive fiscal measures.
- Canadian Equities, as measured by the S&P/TSX Composite, posted a return of -20.9 percent for the quarter, after hitting a record high close on February 20th.
- U.S. equities witnessed a double-digit contraction, with the S&P 500 dropping by 11.7 percent in CAD for the quarter.
- International developed markets, as measured by the MSCI EAFE Index, concluded the quarter in negative territory, generating a -15.2 percent return in CAD.
- The MSCI Emerging Markets index, challenged by the economic turmoil from the pandemic as well as a strong U.S. dollar, posted a -16.1 percent return in CAD during the first quarter.
After adding jobs in January and February, the Canadian labour market lost more than one million jobs in March. In an effort to deal with the devastating economic impact, the Bank of Canada (BoC) cut its overnight interest rate to 0.25 percent and the Government of Canada introduced an unprecedented stimulus package for Canadians.
Although trade tensions started to ease following the U.S. and China signing of a phase-one deal, the economic impact from the global pandemic started to gain traction. As a result, the U.S. Federal Reserve cut rates to the 0 – 0.25 percent range and the U.S. government unveiled a massive stimulus package to battle the crisis.
In an effort to cushion the economy from the financial and economic impact of the pandemic, many Emerging Markets Central Banks responded in an accommodative manner with interest rate cuts. Although the Chinese economy was the first to be hit hard from the Covid-19 virus, it now appears to be on its way to recovery.
In the bond market, the FTSE Canada Universe Bond Index posted positive results during the quarter, generating a return of 1.6 percent. Federal bonds outperformed the Provincial and Corporate bonds and Mid-term bonds outpaced both short- and long-term bonds. Seeing the impact of the virus as well as tumbling oil prices, the BoC responded with a number of accommodative measures. The BoC cut the overnight interest rate, unveiled a new bond purchase program and initiated liquidity facilities, in an effort to stabilize and cushion the economy from the devastating shock of the global pandemic.
Northern Trust – Canada
A global leader in institutional financial services, our exclusive focus in Canada is on providing asset servicing and asset management solutions to institutional asset owners, investment managers, foundations and endowments. We combine regional insights with a global breadth of capabilities to support your needs.
Northern Trust Canada has been successfully servicing clients for over 30 years – including pension funds, investment managers, insurance companies, government agencies and corporations. Our rich heritage and intricate understanding of the region allows us to provide unique insights and strategic perspectives to our clients. Visit northerntrust.com/canada to learn more.
Northern Trust Canada Office: 145 King Street West, Suite 1910, Toronto, Ontario, Canada M5H 1J8.
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 a global presence with offices in 22 U.S. states and Washington, D.C., and across 22 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2020, Northern Trust had assets under custody/administration of US $10.9 trillion, and assets under management of US $1.1 trillion. For more than 130 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.
Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at https://www.northerntrust.com/united-states/terms-and-conditions.