Pension plan returns gained ground in the second quarter (Q2) thanks to a resurgence in Canadian equities, according to a new report from RBC Investor & Treasury Services.
Defined-benefit (DB) pension plans in Canada generated a 2.2% total return in Q2, up from just 0.2% in the first quarter (Q1), the firm says, based on its RBC Investor & Treasury Services All Plan Universe benchmark, which tracks the performance of Canadian DB pensions.
Returns in Q2 were driven largely by an improvement in Canadian equities, which gained 6.8% in the period, following a 3.9% loss in the previous quarter. Global equities recorded a 2.6% return in Q2, up from 2% in Q1. Fixed-income markets saw returns creep up to 0.6% in Q2 from 0.1% in Q1.
“Despite ongoing volatility at home and abroad, Canadian defined-benefit pension plans have posted positive returns during the first half of 2018. The Canadian market rallied this quarter partly due to the energy sector rebound, as well as strong returns from other segments, including the materials sector,” said Ryan Silva, director, head of pension and insurance segments, global client coverage, with RBC Investor & Treasury Services.
“As we head into the second half of the year, asset managers must remain vigilant,” Silva added. “NAFTA trade tensions, U.S.-China trade friction and ongoing geopolitical issues will continue to reverberate through the markets, forcing asset managers to remain attentive to the ongoing volatility and its impact on portfolios and risk exposure.”