Canadian Investment Review

Strong Q2 equity gains good news for DB plans: report

Written by Staff on Wednesday, July 29th, 2020 at 7:48 am

Information stand with a red arrow up. Favorable conditions for business. Investment attraction. Increase profits and wealth. growth of wages, prices for manufactured and sold goods. © Andrii Yalanskyi /123RF Stock PhotosCanadian defined benefit pension plans recovered some of their losses from the start of 2020 in the second quarter off the back of strong public equity gains, according to the Northern Trust Canada universe.

With stimulus spending to tackle the economic impacts of the coronavirus pandemic taking effect in many countries, stock markets rebounded with double-digit gains for the second quarter.

“Despite the level of volatility witnessed over the last several months, Canadian pension plans are tracking in a positive direction, with the median plan in the Northern Trust Canada universe generating a solid 9.9 per cent gain for the second quarter,” said Katie Pries, president and chief executive officer of Northern Trust Canada, in a press release.

“Although there still remains a heightened level of uncertainty in the current environment as the pandemic continues to run its course, plan sponsors continue to persevere as they navigate on a path to sustainability.”

The gains made during the quarter represent a quick turnaround from the dismal losses seen by DB pensions during the first quarter of the year, when Northern Trust’s universe found plans posted a negative 7.1 per cent.

The TSX/S&P composite rose 17 per cent over the quarter, with most sectors pushing the market higher. The S&P 500 rose by 15.3 per cent; international markets, as measured by the MSCI EAFE index, returned 10.1 per cent; and the MSCI emerging markets index returned 13.1 per cent, all in Canadian dollar terms.

As for fixed income, the FTSE Canada universe bond index posted a 5.9 per cent return for the quarter, with corporate bonds taking the lead over government and provincial bonds. During the quarter, the Bank of Canada expanded its purchase program of both provincial and corporate bonds.

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