Canadian pension plans' health declines in first quarter -survey

Thu Mar 31, 2016 4:06pm EDT
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TORONTO, March 31 (Reuters) - The financial health of Canadian pension funds declined in the first quarter of 2016, affected by volatile currency markets, weakness in equity markets and lower bond yields, consultancy Aon said on Thursday.

The quarterly survey of 449 Aon-Hewitt-administered Canadian pension funds, which measures the plans' assets over liabilities to calculate their solvency-funded ratio, showed overall pension solvency dropped by 4.5 percentage points through the quarter.

The median solvency was 83.1 percent, compared with 87.6 percent at the end of the previous quarter

The survey highlighted the negative impact on the funds from the improved strength of the Canadian dollar, which staged a comeback to $0.77 in late March from $0.69 in mid-January. That diminished the pension funds' returns from non-Canadian assets.

"Uncertainty in global economies is causing volatility in commodities and currency, as well as raising concerns about equity valuations and interest rate direction," said Ian Struthers, partner at Aon's Investment Consulting Practice.

Canada's largest public pension funds have continued to perform strongly, benefiting from their strategy of investing in assets such as real estate, infrastructure and private equity as an alternative to public market investments.

The Ontario Teachers Pension Plan, Canada's third biggest public pension fund, reported on Wednesday a 13 percent return on its investments in 2015. (Reporting by Matt Scuffham; Editing by Peter Cooney)