Bolstered by healthy equity returns in two back-to-back quarters, Canadian pension funds continued to recover from recent market turmoil, according to a quarterly survey released by BENCHMARK, the investment analytics and trade management services arm of RBC Global Services.

According to the $250 billion BENCHMARK universe, balanced funds posted a solid 3.9% gain for the quarter ending September 2003, boosting year-to-date performance to 6.9%.

“Among the most significant findings is that the median five-year return has rebounded to 6.5%, approaching the level that most pension plans require to meet their funding obligations,” said Fred Francis, VP, value-added products, RBC Global Services, in a news “This upswing is heartening news for Canadian companies struggling with pension fund shortfalls — which haven’t quite turned the corner yet.”

Canadian equity was the star performer over the past 9 months, but only 38% of pension equity managers beat the 13.9% return of the S&P TSX composite index. “Most active managers shied away from the run-up in technology stock prices that produced a spectacular 48% return in the sector,” explained Francis. “With just 2.4% of domestic equity portfolios in high-flying tech stocks — less than half the weighting in the S&P TSX composite — the median manager underperformed the market index by 1% since the beginning of the year.”

Global stock markets also surged ahead with the MSCI World index rising 12.6% year-to-date in local currency terms. For Canadian-pension fund managers, however, the picture was less rosy, with the soaring Canadian dollar nullifying foreign market gains. Taking currency into account, the global assets of Canadian pension funds actually shrank by 0.3%.

The BENCHMARK results are based on of over 2,200 institutional portfolios with total assets of $250 billion. All returns listed are gross of fees.