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Canadian Pension Plan Returns Decline in Q3 Amid Restrictive Monetary Policy

2024-08-14 17:18:34.718000

Canadian Pension Plans experienced a median return of -3.7% in the third quarter of the year, primarily due to market and economic headwinds. The uncertainty surrounding the direction of monetary policy, mixed inflation readings, and high interest rates all contributed to the decline in both equity and bond markets. Canadian equities and international markets posted negative returns, while emerging markets experienced a modest decline. Despite solid job growth, the Canadian economy saw a slight increase in the unemployment rate. In contrast, the US economy demonstrated strength with a robust labor market and inflationary pressures. The European Central Bank and the Bank of England raised interest rates to combat inflation, while the Bank of Japan maintained its key policy rate. The Bank of Canada also raised interest rates and expects inflation to remain around 3%. The Canadian fixed income market experienced a decline, with provincial bonds suffering the largest drop. Overall, the third quarter witnessed the rapid resurfacing of volatility and unfavorable market conditions.

Caisse de dépôt et placement du Québec (CDPQ), one of Canada's largest pension fund managers, reported a 4.2% gain in the first half of the year. However, the bond and real estate portfolios of CDPQ struggled during this period. The gains were driven by strong performances in equities and private equity. CDPQ's total assets reached CAD 390.7 billion ($309.6 billion) at the end of June. The pension fund manager is focused on diversifying its portfolio and investing in sustainable assets.

Source: Business Wire [bf7dde08], The Globe and Mail [00f5a401]

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