Northern Trust Pension Universe Data: Canadian Pension Plans Carve out Positive Q2 Returns Amidst Inflationary Headwinds
- Canadian Pension plan returned 1.0% for the quarter and 5.3% year-to-date
- Bank of Canada reinstituted an interest rate hike in the quarter to relieve pricing pressures
- Canadian Equities returned 1.1% for the quarter, with Information Technology as the top performer
- U.S. Equities advanced 6.3% in CAD for the quarter, led by Information Technology and Consumer Discretionary sectors
- International developed markets recorded 0.9% in CAD for the quarter
- The Canadian economy remained resilient
- The U.S. Federal Reserve hiked interest rates in May
- European Central Bank and Bank of England continued tightening
- Bank of Canada raised interest rates to 4.75% in June
- The Canadian Fixed Income market declined -0.7% for the quarter, with corporate bonds performing well
- None.
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.
The second quarter of 2023 witnessed a resilient global economy against a backdrop of sticky inflation, higher interest rates, concern about distress in the banking sector and a looming debt ceiling in the
“The first half of 2023 presented many challenges in the financial markets with the primary focus on the battle against inflation. In this environment, pension plans have benefited from a growing trend towards alternative investments, given the diversification and underlying hedging feature embedded in this asset class. As we wait for the inflation pendulum to swing back to more normalized levels, higher interest rates continue to provide a cushion for the funding health of Canadian Pension Plans,” said Katie Pries, President and CEO of Northern Trust Canada.
The strength of corporate and consumer balance sheets remained supportive of economic growth in the second quarter, enabling financial markets to look past the headwind of a lingering inflation cloud and restrictive monetary path. Global developed equity markets advanced higher for the period, generating positive returns for the quarter, while Canadian bond returns were dampened by the continued volatile movement in interest rates.
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Canadian Equities, as measured by the S&P/TSX Composite Index, returned
1.1% for the quarter. Information Technology was the top performer for the quarter, followed by the Consumer Discretionary sector, while the Materials, Real Estate and Consumer Staples sectors posted the weakest results for the period.
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U.S. Equities, as measured by the S&P 500 Index, advanced6.3% in CAD for the quarter with seven of the 11 sectors posting positive results. Information Technology, Communication Services and Consumer Discretionary sectors led the way with double digit returns, while the Utilities and Energy sectors observed the largest decline for the period.
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International developed markets, as measured by the MSCI EAFE Index, recorded
0.9% in CAD for the quarter. The stronger performers were the Industrials, Information Technology and Consumer Discretionary sectors, while the Communication Services, Real Estate and Materials sectors were the largest decliners for the period.
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The MSCI Emerging Markets Index declined -
1.2% in CAD for the quarter, with four of the 11 sectors generating positive returns. The Energy, Financials and Information Technology sectors observed the strongest performance, while the Communication Services, Consumer Discretionary and Real Estate sectors witnessed the largest declines.
The Canadian economy remained resilient during the period, however household debt in
The
International markets generated positive returns for the quarter despite the impact of tightening financial conditions. The European Central Bank (ECB) continued its restrictive path, raising rates by a total of 50 bps in an effort to combat inflation. The Bank of
Emerging Markets witnessed a decline (in CAD terms) during the quarter, lagging developed market counterparts. The Peoples Bank of China (PBoC) cut its one-year loan prime rate by 10 bps for the first time since August of 2022. While
The Bank of
The Canadian Fixed Income market, as measured by the FTSE Canada Universe Bond Index, declined -
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Camilla Greene
+44 (0) 20 7982 2176
Camilla_Greene@ntrs.com
Marcel Klebba
+ 44 (0) 20 7982 1994
Marcel_Klebba@ntrs.com
US &
John O’Connell
+1 312 444 2388
John_O’Connell@ntrs.com
Source: Northern Trust
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