Canadian defined benefit (DB) pension plans, boosted by rebounding Canadian equity returns, posted a 0.4% return in the third quarter (Q3), according to new data from RBC Investor & Treasury Services.
During Q3, Canadian equities generated a 3.8% return, up from a 1.9% loss in Q2. However, this was largely offset by a 2.0% loss in Canadian fixed income in Q3, down from a 1.4% positive return in Q2.
“The energy sector posted stronger returns in September due to a rebound in oil prices which helped lift Canadian equities, while the bond market slipped into negative territory after strong Canadian economic growth led the Bank of Canada to raise interest rates for the first time in seven years,” says James Rausch, head of client coverage, Canada, RBC Investor & Treasury Services, in a statement.
“The rate increase helped boost the financial services sector as well as drive short-term bond yields and the Canadian dollar higher. These developments will be taken into account by Canadian pension fund managers as they assess their asset allocation and look ahead to Q4 and year-end returns,” Rausch adds.
Geopolitical activity continued to reverberate through global equity markets, which recorded a 1.2% return in Q3, down from 2.3% in Q2.
The U.S. dollar continued to slide against the Canadian dollar in Q3, falling further into the red at -3.7%, down from -2.% in Q2.