Rebounding equity markets following tariff shock waves led to increased returns for the Canadian Pension Plan in Q2, as indicated by the data from the Northern Trust Pension Universe.
In the second quarter of 2025, Canadian pension plans managed to eke out modest but positive returns, despite challenges from geopolitical tensions and economic uncertainties.
The average defined benefit (DB) pension plan achieved a 1.6% investment return, with Canadian equities being the major driver of gains. The S&P/TSX Composite Index rose a significant 8.5% during the quarter.
Key factors influencing the performance of Canadian pension plans included:
Equities: The information technology and consumer discretionary sectors contributed notably to equity returns. International equities also delivered solid performance, with U.S. and global indices returning between 5–6.5% in Canadian dollar terms.
Fixed Income: Bonds generally underperformed, posting negative returns (around -0.6% to -1.2%), impacted by rising long-term yields and an overweight in long-duration bonds.
Macroeconomic and geopolitical context: A 90-day tariff pause and relative Canadian government policy stability helped maintain investor confidence and policy clarity domestically. Canadian macro fundamentals showed resilience with wage growth above inflation and controlled credit losses in banks. However, uncertain trade policies and geopolitical tensions, including Middle East conflicts and tariff frictions, contributed to market volatility and cautious central bank stances.
Currency: The Canadian dollar strengthened roughly 5% against the U.S. dollar during the quarter, influencing the international returns component.
Despite volatility and external geopolitical risks, pension plans benefited from a recovery in global and Canadian equities after an earlier market bottom in mid-April 2025. This helped improve the financial health and solvency of pension plans, supporting long-term sustainability even amid uncertainty.
Elsewhere in the global markets, the MSCI EAFE Index gained 6.2% in CAD for the second quarter, while the MSCI Emerging Markets Index generated 6.4% in CAD. The Bank of Japan announced plans to slow government bond purchases from April 2026.
As of June 30, 2025, Northern Trust Corporation, a leading provider of wealth management, asset servicing, asset management, and banking services, had assets under custody/administration of US$18.1 trillion and assets under management of US$1.7 trillion. Northern Trust Corporation can be found on the Nasdaq under the symbol NTRS and can be followed on Instagram @northerntrustcompany and LinkedIn.
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[1] Source: Globe and Mail [2] Source: CBC News [3] Source: Canadian Pension Plan Investment Board [4] Source: Bank of Canada [5] Source: Financial Post
- In the second quarter of 2025, despite volatility and external geopolitical risks, Canadian pension plans benefited from a recovery in global and Canadian equities, which positively contributed to their news about financial performance.
- The cloud of geopolitical tensions and economic uncertainties, including Middle East conflicts and tariff frictions, had an impact on the performance of Canadian pension plans, but the strong performance of industries such as information technology and consumer discretionary helped to mitigate these challenges.
- For investors looking to further explore the world of business and investing, they can follow trending news on the financial health and solvency of Canadian pension plans, as well as global markets such as the MSCI EAFE Index and the MSCI Emerging Markets Index, by reaching out to Northern Trust Corporation, a leading asset management and wealth management service provider, for more information.
