Candian defined benefit plans took a plunge in investment returns in Q1 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.
Katie Pries, president and CEO of Northern Trust Canada, explained that 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.
“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,” Pries commented.
After a positive start to 2020, global markets were shaken by the economic impact of the COVID-19 pandemic as it rippled across the world during the first quarter, Northern Trust observed.
Meanwhile, escalating oil price tensions between the Middle East and Russia compounded the magnitude of the market decline.
Elsewhere, in response to the spreading coronavirus, health care policy directives included shutting down non-essential businesses, closing borders and instituting travel bans worldwide.
Northern Trust noted that 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.
The bank said: “This was witnessed through emergency interest rate cuts, further rounds of quantitative easing which included new liquidity facilities, as well as extensive fiscal measures.”
In the bond market, the FTSE Canada Universe Bond Index posted positive results during the quarter, generating a return of 1.6 percent.
Federal bonds outperformed the provincial and corporate bonds and mid-term bonds outpaced both short- and long-term bonds, Northern Trust Pension Universe found.
“Seeing the impact of the virus as well as tumbling oil prices, the Bank of Canada responded with a number of accommodative measures. The Bank of Canada cut the overnight interest rate, unveiled a new bond purchase program and initiated liquidity facilities, in an effort to stabilise and cushion the economy from the devastating shock of the global pandemic,” Northern Trust added.
Northern Trust Universe Data also recently found that investment returns were down significantly for institutional plan sponsors in Q1 2020 as a result of COVID-19’s effect on the financial markets.
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