Canadian defined benefit pension plans generated a median return of four per cent in the first quarter of 2023, up from 3.8 per cent in the fourth quarter of 2022, according to the RBC Investor and Treasury Services’ universe.

The most substantial increase among asset classes was foreign equities, which returned 6.9 per cent for the quarter. The MSCI world index returned 7.6 per cent, with the strongest performances from information technology (21 per cent), communication services (17.9 per cent) and consumer discretionary (16.3 per cent). By contrast, the MSCI emerging markets index trailed the developed markets benchmark and returned 3.8 per cent.

Read: Canadian DB pension plans down 12.8% in 2022: report

Canadian equities returned 4.2 per cent and the TSX composite index rose by 4.6 per cent over the quarter, with the IT (26.5 per cent) and consumer staples (7.9 per cent) sectors performing strongly. However, these gains were slightly offset by the underperformance of energy (negative 2.3 per cent) and financials (1.7 per cent).

Canadian fixed income returned 3.7 per cent, driven by declining government bond yields and representing a significant increase from the 0.1 per cent return generated in the previous quarter. The FTSE Canada universe bond index returned 3.2 per cent in the first quarter, up from 0.1 per cent. The FTSE Canada long-term bond index (4.7 per cent) outperformed the FTSE Canada short-term bond index (1.8 per cent). The report noted government bonds outpaced corporate bonds during the quarter.

“It is important for asset managers to be watchful of the continuing volatility in the markets for the remainder of the year,” said David Giannone, managing director and global head of business development at RBC Investor and Treasury Services, in a press release. “They should also ensure that their portfolios are diversified to effectively manage their risk exposure.”

Read: Canadian DB pension plans see median return of 4.27% in last quarter of 2022: report