06 November 2017
Reporter: Drew Nicol

Mixed bag for Canadian pension funds Q3 revenue

Two of the largest banks in Canada have offered conflicting reports on the country’s pension fund revenue reports.

CIBC Mellon reported a median return of 0.55 percent for the third quarter, making it the sixth straight quarter of positive results.

The bank’s index showed a one-year return of 6.14 percent was just below the Canadian Master Trust Universe's 10-year annualised return of 6.17 percent and also marks the sixth consecutive quarter of positive one-year performance.

BNY Mellon Canadian Master Trust Universe is a fund-level tracking service with a market value of more than $232.8 billion and an average plan size of $2.7 billion.

The bank’s pension universe consists of 87 Canadian corporate, public and university pension plans.

Catherine Thrasher, managing director, global risk solutions Canada, BNY Mellon Asset Servicing, said: "The top performing asset class in the third quarter is Canadian equities with a median return of 3.4 percent.”

“International equity was the best performing asset class over the one year time horizon (14.74 percent). Fixed income underperformed in the third quarter and one year time horizons with a median returns of -2.01 percent and -3.01 percent, respectively.”

Meanwhile, Northern Trust Canadian Defined Benefit Pension Plan Universe, reported a median revenue drop off of 0.7 percent in Q3.

According to Northern Trust’s data, European equities, boosted by stronger investor confidence and expectations of a tighter monetary policy from the European Central Bank, rose 2.5 percent.

At the same time, a weaker US dollar and a pick-up in commodity prices helped the MSCI Emerging Markets index gain 4 percent in the third quarter.

Arti Sharma, president and CEO of Northern Trust Canada, said: “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.

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