Canadian Pension Plans Lose Ground in Q2

July 12, 2011 ( - After gaining ground in the previous three consecutive quarters, many Canadian pension plans suffered moderate losses in the second quarter of 2011 as a result of negative Canadian equity returns and a decline in federal bond yields.  

The Mercer Pension Health Index stands at 71 per cent on June 30, down 4 per cent over the quarter.  

“Long-term federal bond yields dropped about 20 basis points in the quarter, reversing the trend of the previous two quarters,” said Scott Clausen, Retirement, Risk and Finance professional leader for Canada, in a press release. “This decrease in bond yields, coupled with an increase in the cost of purchasing annuities, dropped the index by about 3 per cent. The remaining 1 per cent decline in the index is due to investment returns.”   

“Pension fund returns were impacted by a -5.1 per cent return of the S&P/TSX Composite index,” adds Rob Stapleford, leader of Mercer’s Investment Consulting business in central Canada. “The Information Technology, Materials and Energy sectors lagged the market due to concerns about the global economy. Foreign equity returns (in Canadian dollars) were slightly negative. Bond returns were positive but could not overcome negative equity returns thereby lending to fund returns lagging the liability benchmarks.”