Modest gains in the second quarter despite challenging conditions
Canadian pension plans posted modest gains in the second quarter of 2025, despite challenging conditions with volatile global markets and tariff uncertainty.
The median plan returned 0.6% for the quarter and 1.8% year-to-date, according to the Northern Trust Canada Universe even as continued geopolitical tensions and shifting trade policies dominated with the US administration’s fluctuating stance on tariffs contributing to market swings.
Despite the turbulence, central banks remained cautious with both the Bank of Canada and the Fed opting to hold interest rates steady, keeping their focus on inflation and employment data rather than reacting directly to geopolitical developments.
While the economy showed signs of slowing, inflation remained firm, and wage growth outpaced inflation. Unemployment ticked up to 6.9% from 6.7% in March.
“Beneath the mounting tensions and waves of volatility witnessed year to date, pension plan investments have performed reasonably well, contributing to the healthy rise in plan assets this year. This positive performance serves as a cushion providing further support to long term plan sustainability as plan sponsors navigate through uncertain times,” said Jeff Alexander, President and CEO of Northern Trust Canada.
The Northern Trust Canada Universe tracks institutional defined benefit plans that use the firm’s performance measurement services.
Among the highlights for asset classes in the second quarter, equities delivered strong results across the board, while Canadian bonds declined due to rising yields. The Canadian dollar appreciated over 5% against the U.S. dollar, closing at 73.48 cents USD.
Canadian Equities (S&P/TSX Composite Index) gained 8.5% as all sectors rose, but top performers were IT and Consumer Discretionary, while the weakest was Energy.
For US Equities (S&P 500 in CAD) was up 5.2%, led by IT and Communication Services, while Energy and Health Care declined.
International Developed Equities (MSCI EAFE in CAD) were up 6.2%. Communication Services outperformed; Energy and Health Care lagged.
Emerging Markets (MSCI EM in CAD) were up 6.4%. IT and Industrials led while Consumer Discretionary declined.
Canadian Fixed Income (FTSE Canada Universe Bond Index): declined -0.6%. Corporate bonds gained, while Federal and Provincial bonds fell. Short-term bonds were positive; mid and long durations declined.
