Robust equity markets provided a solid foundation for Canadian pension plans during Q4 2020, with the median Canadian plan returning 5 per cent for the quarter and closing a volatile year with a 10 per cent gain, according to the Northern Trust Canada Universe.
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 service offerings.
It was revealed that during Q4 2020, global equity markets generated positive returns as investors welcomed the relief of further fiscal stimulus and the long-awaited approval of vaccines.
Canadian Equities, as measured by the S&P/TSX Composite Index, advanced 9 per cent for the quarter and 5.6 per cent for the year. Healthcare and consumer discretionary sectors led performance for the quarter and the information technology sector was the top performer for the year, Northern Trust notes.
According to Northern Trust, US equities posted solid gains with the S&P 500 Index generating 7.0 per cent in CAD for the quarter and 16.3 per cent in CAD for the year.
Meanwhile, emerging markets witnessed solid results during the quarter, leading performance among the world’s regions, says Northern Trust.
The Chinese Central Bank left interest rates unchanged as the economy continues to recover. The People’s Bank of China injected cash intermittently throughout the quarter, bringing further liquidity and support to the country’s banking system.
The Reserve Bank of India also maintained an accommodative stance as it left interest rates unchanged for the quarter, affirms Northern Trust.
Elsewhere, the Bank of Canada maintained its current pace of their quantitative easing program and left its overnight interest rate unchanged at 0.25 per cent.
The Canadian fixed income market, as measured by the FTSE Canada Universe Bond Index, returned 0.6 per cent for the quarter and 8.7 per cent for the year.
Northern Trust further observes that during the quarter, the Canadian yield curve witnessed a rise in long term government bond yields while short term yields declined.
“The global pandemic undoubtedly was the focal point over the last year, but 2020 also symbolised a period of leadership, adaptation and resiliency. Monetary and fiscal leaders were challenged with seeking unprecedented solutions for economic and financial relief,” comments Katie Pries, president and CEO of Northern Trust Canada.
Pries adds: “Many Canadians were confronted with pivoting from a traditional work setting to a virtual work from home environment. Canadian pension plan sponsors faced the difficult task of navigating through an extraordinary and unpredictable period in history, while safeguarding plan assets for future retirement. This test of resiliency was met with solid performance.”
