The average Canadian defined benefit pension plan posted a median return of 3.6 per cent in the first quarter of 2024, according to a new report by RBC Investor Services.

The report, which tracks performance and asset allocation across Canadian DB plans, credited the positive investment return to the strong performance of equities.

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Global equities returned 9.8 per cent during the quarter, trailing the MSCI world index return of 11.7 per cent, while Canadian equities returned 6.8 per cent, slightly ahead of the TSX composite index (6.6 per cent). Domestic equities benefited from gains in the energy (13.1 per cent) and industrial (11.1 per cent) sectors.

Canadian fixed income declined with a negative 1.9 per cent return, slightly lower than the FTSE Canada universe bond index’s negative 1.2 per cent return. Short-term bonds (0.3 per cent) outperformed the return of the FTSE Canada long-term bond index (negative 3.6 per cent) in the quarter.

“While equity performance hints at an improving market sentiment, plans’ Canadian fixed income weighting significantly influenced their portfolio performance this quarter,” said Sylvain Gervais, managing director of business development at RBC Investor Services, in a press release.

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A separate report by Northern Trust Corp. found the median Canadian DB plan returned 2.5 per cent in the first three months of 2024.

Equities in emerging markets, measured in the MSCI emerging markets index, returned 5.1 per cent, due to strong results from the information technology and consumer discretionary sectors. However, it still lagged the 8.7 per cent return from international developed markets measured in the MSCI EAGE index.

“The transition through interest rate cycles within the economic ecosystem quite often can be a challenging path, necessitating the need for quality and granularity of data, comprehensive integrated tools and sound investment strategies, as pension managers navigate this journey,” said Katie Pries, president and chief executive officer at Northern Trust Canada, in a press release. “The strength of Canadian pension returns this quarter validated the pension toolkit, a bespoke asset utilized by plan sponsors, is channeling pension plans on a course to sustainable financial health.”

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