Canadian Pension Returns Defy Slumping Domestic Equities

Pensions returned 0.37% during Q1, despite Canadian equities falling 3%.

Canadian pension plans reported their eighth consecutive quarter of positive gains, with a median return of 0.37% for the first quarter of 2018, despite domestic equities falling nearly 3% during that same time frame, according to CIBC Mellon.

The BNY Mellon Canadian Master Trust Universe, which is comprised of 85 Canadian corporate, public, and university pension plans, also reported a one-year return of 6.88%, which is comparable to its 10-year annualized return of 6.99%. The funds also reported three- and five-year annualized returns of 5.72%, and 9.15%, respectively.

The combined funds have a market value of more than C$242.3 billion ($188.6 billion), with an average plan size of C$2.8 billion. Approximately 65% of the plans posted positive results for the quarter.

“The top-performing asset classes in the first quarter were US equities and non-Canadian equities with a median return of 2.38% and 2.37%, respectively,” said Catherine Thrasher, a managing director at BNY Mellon Asset Servicing, in a release.

International equities were the best-performing assets over the one-year time horizon, surging 13.05%, while the weakest-performing asset class during the quarter was Canadian equities, which posted a median loss of 2.98%.  Despite the down quarter for the Canadian equity asset class, it still outperformed the S&P/TSX Composite Index, which lost 4.52% for the quarter.

Canadian universities posted a quarterly median return of 0.26%, and a one-year median return of 6.72%, while Canadian foundations and endowments posted a negative median return of 0.07% for the quarter, and a 6.04% gain over the one-year time period.

Meanwhile, the median quarterly return for the US equities asset class was 2.38%, which beat the S&P 500 Index’s return of 2.12%. And international equity and non-Canadian equity, which saw median returns of 2.35% and 2.37%, respectively, were ahead of the MSCI EAFE Index and MSCI World Index returns of 1.44% and 1.71%.

Fixed income investments remained relatively flat, edging 0.18% higher during the quarter, which outperformed the FTSE TMX Canada Bond Universe Index return of 0.10%. And alternative asset classes were led by infrastructure, which saw a median return of 5.49%, followed by private equity, hedge funds, and real estate, which rose 5.10%, 3.37%, and 1.94%, respectively.

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