New report shows positive returns in fourth quarter and the full year
The volatility seen in 2024 was no match for the managers of Canadian pension plans, with new stats showing positive returns for the fourth quarter and the year overall.
The Northern Trust Canada Universe, which tracks the performance of Canadian institutional defined benefit plans that subscribe to the firm’s performance measurement services, reveals a median return of 1.5% for Q4, 2024, and a 10.5% full-year return.
Last year saw several challenging themes for pension fund managers including geopolitical tensions, inflation, and uncertainty around economic growth, but also less restrictive monetary policies and some buoyancy for equity markets in Canada and the United States, especially towards year-end, although global stocks saw greater downward pressure.
The S&P/TSX Composite Index, advanced 3.8% for the quarter and 21.7% for the year, while the S&P 500 Index generated a 9.0% gain in Canadian dollar terms for the quarter and a solid 36.4% for the year.
Both indexes were boosted by strong performance in tech sector stocks, but communications services were among the winners in the US but the weakest in Canada (for the quarter and full year).
However, in the fourth quarter, while stocks gained, bonds produced flat returns with the Canadian yield curve seeing strong moves in both directions.
The Canadian economy saw some softness in the fourth quarter and while there was a jumbo 50-basis-points interest rate cut in December, the Bank of Canada signalled less urgency in further reductions with inflation under control. While the US economy was resilient, the Fed was concerned about inflation and the potential for a fast pace of cuts faded.
“This past year presented both challenges and opportunities as the macroeconomic environment pursued stability and normality. Whether the economic tone is one of caution or optimism, plan sponsors are adapting well as they continue to modernize frameworks and implement strategies to secure consistent growth and protection of their respective pension plan investments both now and into the future,” said Katie Pries, president and CEO of Northern Trust Canada.
