New research from Morningstar DBRS shows that Canadian pension funds did well in 2024, but performance in the first half of 2025 was weaker on average, hampered by weaker private equity valuations and April’s downturn in public equities.
Entitled Canadian Pension Funds: Investment Returns Constrained in H1 2025 Following Financial Market Volatility, the report analyzes the investment returns of seven Canadian pension funds in 2024 and the first half of 2025.
“In 2024, Canadian pension funds’ asset base grew $2.4-trillion on the back of robust investment returns that exceeded their respective 10-year averages,” they write.
Returns in 2024 ranged between 8.3 per cent and 12.6 per cent – 130 to 750 basis points higher than those generated in 2023. “While public equity strategy continued to drive performance, Canada pension funds experienced good returns across many major asset classes, including fixed income, private credit and infrastructure,” the report states.
Although public equity markets had mostly rebounded by the end of June, weaker performance of private assets persisted in the first half of 2025. Overall, Canadian pension funds reported net investment returns between just one per cent and 4.6 per cent in the first six months of 2025.
Affected by volatility
In the first half of the year, Canadian pension funds were also broadly affected by volatility, resulting in below-average returns, they add. “AIMCo, OMERS, and OTPP (Alberta Investment Management Corporation, Ontario Municipal Employees' Retirement System and the Ontario Teachers Pension Plan) each reported their H1 2025 interim net investment returns around two per cent, substantially lower than their H1 2024 returns,” they write. “The underperformance crosses many asset classes.”
The report also looks at U.S. private equity and the continuing shift towards private credit assets. Canadian pension funds reported stable fixed income returns between 1.6 per cent and 3.9 per cent in the first half of 2025, thanks in part to higher interest incomes. In real estate, they say pension funds continue to experience relatively weak returns from office and shopping centre real estate investments with higher interest rates, e-commerce and hybrid working affecting valuations.
“Notwithstanding the ongoing macroeconomic uncertainties and geopolitical tensions, we expect Canadian pension funds’ 2025 full-year performance to be slightly improved from H1 2025, but somewhat lower than their 10-year average returns,” the report concludes.
