After suffering through poor equity markets since 2000, last year marked the first period that returns were positive for a majority of Canadian pension plan sponsors. The median return of the Russell/Mellon Total Fund Canadian Trust Universe posted an annual return of 14.4% for 2003.

“This is good news for pension plans and their members,” said Shawn Menard, managing director of Russell/Mellon Canada Inc., in a news release. “Returns across all major asset classes were positive, with Canadian asset classes contributing the lion’s share of last year’s performance. The Canadian fixed income continued to provide stable, positive returns this year and the equity markets provided investors with double digit gains across all styles.”

However, Menard cautioned that a few more good years are will be needed to help repair the damage from recent years.

Asset mix continued to be the dominant factor in driving returns for the plan sponsors under Russell/Mellon sample.

According to Menard, “The median asset mix of our sample showed an increased appetite towards equities. There was a growth of 5.6% over the same period last year. Foreign content continues to rise among Canadian plan sponsors.”

The median asset allocation to U.S. and non-North American markets increased to 26.8%, however, they still sit below the legislated limit of 30%. Returns from non-Canadian based holdings suffered due to a strengthening Canadian dollar, which appreciated by 20.67% in 2003. Plan sponsors that did not hedge their foreign currency holdings did not participate in the rally in U.S. markets as currency depreciation ate into Canadian dollar returns.

The Russell/Mellon Canadian Trust Universes provide a collection of total-fund and asset class performance universes for corporate defined benefit pension plans, foundations, endowments, and public funds. They offer 24 Canadian universes comprising over 450 accounts representing over $156 billion in assets.