Northern Trust Pension Universe Data

Canadian Pension Plan Investments Weather Rough Markets in First Quarter 2020

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 20^th.

• 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.