Canadian defined benefit plans experienced a weaker return in the third quarter, according to the Northern Trust Canadian Defined Benefit Pension Plan universe.
“The median Canadian plan returned -0.7 percent for the quarter, reversing the trend of positive returns earned in the first two quarters of 2017,” said Arti Sharma, President and CEO of Northern Trust Canada. “The two interest rate hikes in the quarter resulted in a negative impact on the returns of pension plans. Pension plans with longer duration bonds underperformed as the yield curve rose over this period. Despite the weaker results experienced this quarter, Canadian pension plans continue to enjoy a healthy return of 4.4 percent year-to-date.”
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 servicing offerings.
The S&P TSX Composite Index, supported by an increase in crude oil prices and positive economic sentiment, gained 3.7 percent in the third quarter. Seven of the 11 GICs sectors closed the quarter positively, with Energy stocks gaining 6.6 percent on the back of rallying oil prices. Sectors that are defensive in nature such as Utilities and Consumer Staples underperformed.
Despite escalating tensions with North Korea and the economic impact caused by natural disasters, unrelenting optimism continues to propel US equity markets forward. U.S. equity markets, as measured by the S&P 500 Index, gained 0.6 percent in the third quarter (+4.5 percent in USD). This marks the sixth consecutive quarter the S&P 500 Index has earned a positive return. Information Technology was the top-performing sector while Consumer Staples lagged. The MSCI EAFE, which measures the performance of international developed markets, rose 1.6 percent over the quarter. European equities, boosted by stronger investor confidence and expectations of a tighter monetary policy from the ECB, rose 2.5 percent. A weaker U.S. dollar and a pick-up in commodity prices helped the MSCI Emerging Markets index gain 4.0 percent in the third quarter.
The Bank of Canada, citing “bolstered” confidence in the Canadian economy, raised its overnight lending rate for the first time in seven years during the third quarter. Two +0.25 percent hikes, in July and September, lifted the rate to 1.0 percent. The Canadian fixed income market as measured by the FTSE TMX Universe Bond Index posted a loss of 1.8 percent over the quarter, with long term bonds down 4.1 percent, reversing gains from the previous quarter.
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 offices in the United States in 19 states and Washington, D.C., and 23 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2017, Northern Trust had assets under custody/administration of US$9.7 trillion, and assets under management of US$1.1 trillion. For more than 125 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/disclosures.