Canadian defined benefit pension plans posted a return of 14 per cent in 2019, according to the RBC Investor and Treasury Services’ universe.
These double-digit returns were the second highest for DB plans in the past decade, bolstered by a surge in equity markets both domestically and around the world.
“Over the past 10 years, the average Canadian defined [benefit] plan has generated an annualized return of eight per cent on its assets,” said David Linds, managing director and head of asset servicing for Canada, in a press release. “These results are quite impressive, though we can’t discount the impact of global uncertainty and trade tensions in the years ahead. While the performance of equity markets suggests that investors expect to see continued growth, plan sponsors need to continue building robust strategies to prepare for higher volatility as earnings and fundamentals begin to slow.”
RBC’s universe reports on data from 119 Canadian DB plans and indicates a median funded status of 101 per cent, up from 100 per cent in 2018.
Canadian equities performed especially well for the plans, posting 21.4 per cent returns for the year, although just 3.1 per cent in the final quarter. Global equities, meanwhile, returned 20.7 per cent for the year and 6.8 per cent for the quarter.
Domestic bonds also outperformed on the year, returning 10.3 per cent, but actually decreasing 1.6 per cent during the fourth quarter.