The strong performance of domestic equites in the last months of 2021 helped Canadian defined benefit pension plans secure median annual returns of 8.9 per cent, according to a new report by RBC Investor and Treasury Services.

During the year, Canadian DB plans performed best during the second and fourth quarters, with median asset growth of 4.4 per cent and 4.5 per cent, respectively. During the first quarter, assets shrank by 0.2 per cent, while the third quarter saw gains of 0.6 per cent.

Much of the gains during 2021 can be attributed to the strength of domestic equities. Canadian equities grew in value by 27 per cent, while global equities gained 5.3 per cent. Returns from emerging market economies decreased by 3.37 per cent, with the losses led by Chinese equities, which dropped by an average of 22.4 per cent.

Read: Canadian pension returns up during Q4, buoyed by global equities: report

Portfolios were hampered by fixed income performance, with Canadian fixed income assets down 1.9 per cent during the year; however, they rebounded somewhat in the fourth quarter.

Longer-dated bonds saw more dramatic falls than shorter-dated ones, with the FTSE Canada long-term index dipping 4.5 per cent and the FTSE Canada short-term index down by 0.9 per cent.

In a press release, Niki Zaphiratos, managing director of asset owners and client coverage for Canada at RBC Investor and Treasury Services, said Canadian DB pension plans have, so far, proven resilient against the market fluctuations caused by the Omicron variant of the coronavirus. However, she warned DB plan sponsors should be aware of other threats to portfolio performance in 2022.

“New COVID-19 variants, the Russia-Ukraine crisis and imminent interest rate hikes — stemming from global shortages of workers and resulting inflationary pressures — introduce the potential for further volatility. Plan sponsors will have considerable risk factors to navigate in 2022.”

Read: Canadian pension plan returns see modest growth in Q3: report