The average Canadian defined benefit pension plan returned 1.1 per cent during the first quarter of 2025, a slight decrease from 1.6 per cent in the previous quarter, according to a new report by RBC Investor Services.
It found Canadian equities returned 1.2 per cent, slightly underperforming the TSX composite index, which rose 1.5 per cent. The materials sector was the main contributor to the positive performance, surging 20.3 per cent on the strength of gold stocks. However, the information technology sector declined 7.5 per cent, reflecting broader challenges within the tech industry.
Foreign equities held by pension plans fell 0.1 per cent, while the MSCI world index declined by 1.7 per cent. Within the benchmark, there was a sharp contrast between the performance of value and growth stocks: the MSCI world value index rose 4.9 per cent, while the MSCI world growth index fell by 7.7 per cent.
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Meanwhile, U.S. equities, as represented by the S&P 500, declined 4.2 per cent, underperforming the MSCI EAFE index, which gained 6.9 per cent. The EAFE’s outperformance was driven by strong results in European markets, particularly Germany, which is expected to benefit from fiscal stimulus, and by the euro’s appreciation against the Canadian dollar. Emerging markets also advanced, with the MSCI emerging markets index rising three per cent.
Fixed income markets increased by 1.8 per cent, compared to a two per cent increase in the FTSE Canada universe bond index. Mid-term bonds led the way, climbing 2.7 per cent, reflecting investors’ preference for safer assets amid ongoing uncertainty surrounding central bank policies and political transitions.
“The first quarter reminded us that sector positioning, currency exposure and geopolitical awareness are key to pension performance,” said Isabelle Tremblay, lead for the asset owner segment at RBC Investor Services, in a press release. “The appreciation of the euro versus the Canadian dollar amplified foreign equity gains, while political developments, including leadership changes both domestically and abroad, sparked investor recalibration. Pension plans that remained diversified and nimble were better positioned to navigate these challenges.”
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A separate report by Northern Trust Corp. found the median pension plan returned 1.5 per cent for the quarter. Canadian equities increased 1.5 per cent, while U.S. equities fell by 4.2 per cent, representing the worst drop since the second quarter of 2022. Meanwhile, international developed markets jumped 7.1 per cent.
“Fear and uncertainty cascaded across financial and currency markets during the first quarter, dampening the sentiment of market participants across the globe,” said Katie Pries, chief executive officer of Northern Trust Canada, in a press release. “As investors look for clarity and markets seek out a path to certainty and stability, pension plan sponsors remained sound and committed to protecting plan assets while weathering this volatile period.”
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