The average Canadian defined benefit pension plan generated a median return of 8.4 per cent for the fourth quarter of 2023, according to a report by Northern Trust Corp.

The report, which tracks DB plans within the Northern Trust Canada universe, found the average Canadian DB plan ended the year with a median 10 per cent return. It noted the fourth quarter was defined by positive macroeconomic data and a slowdown for inflation alongside a pivot by many central banks to pause rate hikes.

Read: Average Canadian DB pension plan returns 8.2% in Q4 2023: report

U.S. equities generated the biggest returns, with 8.9 per cent for the quarter and 22.9 per cent for the year. Canadian equities finished in second place, with 8.1 per cent for the quarter and 11.8 per cent for the year. International developed markets — as measured by the MSCI EAFE index — returned 7.7 per cent for the quarter and 15.7 per cent for the year. All sectors generated positive returns for the quarter, except the energy sector, which posted a decline for the period. The full year witnessed gains across all sectors, with information technology and industrials sectors being the top performers.

Canadian fixed income benefited from the change in policy by central banks, returning 8.3 per cent during the quarter and 6.7 per cent for the year, as measured by the FTSE Canada universe bond index. Provincial bonds outperformed corporate and federal bonds through the quarter. However, corporate bonds ended 2023 as the top performer in this asset category. Long-term bonds ended the quarter with a 14.8 per cent return, outpacing both short and mid-term bonds for the year.

“This past quarter and year were undoubtedly a period enfolded in a blanket of volatility,” said Katie Pries, president and chief executive officer of Northern Trust Canada, in a press release. “Notwithstanding the waves of uncertainty throughout the year, a focus on geopolitical and economic trends has been paramount for pension plans. As financial markets turned their attention to economic data driving their underlying pulse and pace, plan sponsors have increasingly adopted complex asset strategies that enhance portfolio diversification and drive long term sustainability of their investment programs.”

Read: Average Canadian DB pension plan returns -4% in Q3 2023: reports