Canadian Pensions Report Sixth Consecutive Positive Quarter

Canadian pension plans returned 0.55% for the third quarter, marking the sixth consecutive quarter of positive results, according to the BNY Mellon Canadian Master Trust Universe.

The one-year return was 6.14%, which is just below the Canadian Master Trust Universe’s 10-year annualized return of 6.17%. It also reported three- and five-year annualized returns of 7.4% and 9.8%. respectively. The BNY Mellon Canadian Master Trust Universe is a fund-level tracking service that consists of 87 Canadian corporate, public, and university pension plans that have a total market value of more than $232.8 billion, and an average plan size of $2.7 billion.

“The Canadian plans remained positive in the third quarter of 2017, with 70% of the plans posting positive results … and a 2017 year-to-date median return of +5.32%,” said Catherine Thrasher, a managing director at BNY Mellon Asset Servicing. “The Canadian foundations and endowments posted the best median return for the third quarter (+1.22%), followed by Canadian Universities’ median return of +0.88%.”

The top-performing asset class in the third quarter was Canadian equities, which reported a median return of 3.4%, and international equity was the best-performing asset class over the one-year period with a gain of 14.74%. Meanwhile, fixed income’s third-quarter and one-year returns underperformed, with median losses of 2.01% and 3.01%, respectively.

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The median return for US equity for the quarter was 0.60%, just below the S&P 500 Index return of 0.61%. International equity and non-Canadian equity had median returns of 1.49% and 1.41%, compared to the MSCI EAFE Index and MSCI World Index returns of 1.56% and 1.08%, respectively.

Canadian large-cap equities posted the highest median results for the quarter, rising 3.9%, which surpassed the S&P TSX Index by 22 basis points. Median returns from Canadian long-duration fixed income (-4.03%) and Canadian government bonds (-1.78%) were underperformers in the third quarter, according to BNY Mellon.

Alternative asset classes were led by real estate, which had a median return of 1.36%, followed by private equity, which gained 0.52%. Infrastructure was up 0.42%, and hedge funds declined 0.92% in the third quarter, as reported by the Asset Allocation Trust Universes.

Tags: BNY Mellon Canadian Master Trust Universe, Canada, Pension

UK’s private pension plans continued to improve their funded status in October, as assets rose while liabilities fell for the second consecutive month, according to JLT Employee Benefits (JLT).

JLT said that buoyant equity markets have continued to boost defined benefit pension plans, as deficits continue to decline—despite concerns over rising inflation.

“However, many challenges still remain,” said Charles Cowling, director, JLT Employee Benefits, in a release. “Pension schemes which are carrying out actuarial valuations in 2017 are likely to show bigger deficits than in 2014,” he said, adding that “trustees and finance directors may wish to take advantage of these slightly calmer waters to explore opportunities to offload and settle pension liabilities.”

As of Oct. 31, JLT estimated that the funding level of all UK private-sector pension plans had increased to 91% from 90% at the end of September, and up from 84% at the same time last year. Total assets for the plans topped out at £1.586 trillion, compared to £1.558 trillion at the end of September, and £1.527 trillion at the end of October 2016. Liabilities for the plans edged up to £1.74 trillion from £1.737 the previous month, but were down from £1.809 trillion at the same time last year.

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This resulted in the deficit for all UK private-sector pension plans falling to £154 billion from £179 billion at the end of the previous month, and is down £128 billion from £282 billion as of Oct. 31, 2016.

For the FTSE 100 companies, the funding level rose 2% during the month to 95% at the end of October, compared to 87% at the end of October 2016. Assets grew £9 billion to £673 billion from the end of September, and were up £30 billion from the £643 billion in assets reported in the year-ago period. Meanwhile, liabilities for the FTSE 100 pension funds increased £1 billion during the month to £712 billion, but dropped from £738 billion at the end of October 2016.

The deficit for the FTSE 100 companies fell £8 billion to £39 billion from the previous month, and was down £56 billion from £95 in the year-ago period.

And for the FTSE 350 companies, the funding level gained 1% during the month to 94% at the end of October, and was up 7% from the same time last year. Total assets for the group were £760 billion as of Oct. 31, compared to £749 billion at the end of September, and £729 billion at the end of October 2016. Total liabilities increased by $1 billion during the month to £809 billion, but were down from £841 billion at the same time the previous year.

As a result, the deficit for the FTSE 350 pension funds fell £10 billion during the month to £49 billion, and has been reduced by more than half from £112 billion at the end of October last year.

Tags: JLT Employee Benefits, Pension, UK