Canadian defined benefit pension plans experienced a modest second quarter, according to separate reports by BNY Mellon Asset Management Canada Ltd. and RBC Investor and Treasury Services.

The plans in BNY Mellon’s Canadian pension fund-level benchmark posted its ninth straight positive result with a 2.16 per cent increase for the quarter. It found that plans with a scale of more than $1 billion outperformed last quarter by 15 basis points.

Canadian equities returned 5.48 per cent for the quarter, falling short of the 6.77 per cent return posted by the S&P/TSX composite index. U.S. equity’s median return also trailed its benchmark, posting 5.24 per cent while the S&P 500 index rose 5.54 per cent. International equities struggled the most, only yielding a 0.44 per cent return relative to the MSCI EAFE index benchmark at 1.05 per cent.

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Canadian fixed income returns were also small, with a median of 0.74 per cent, but still outperformed the FTSE TMX Canada bond universe index’s return of 0.51 per cent. Private equity posted a median return of 4.23 per cent while real estate returned 2.45 per cent.

RBC Investor and Treasury Services’ universe of defined benefit pension plans also posted a mild, if slightly better, return of 2.2 per cent for the same quarter.

The gains mark an improvement from the first quarter’s meagre 0.2 per cent returns. Canadian equities fared somewhat better, propelled by better energy sector results at 6.8 per cent, and global equities rose 2.6 per cent. Though fixed income markets only posted a 0.6 per cent rise, this result was an improvement on the 0.1 per cent return of the previous quarter.

“Despite ongoing volatility at home and abroad, Canadian defined benefit pension plans have posted positive returns during the first half of 2018,” noted Ryan Silva, director and head of pension and insurance segments and global client coverage at RBC Investor and Treasury Services, in a press release.

Read: Hefty equity returns lead to strong gains for U.S. institutional investors in 2017

“The Canadian market rallied this quarter partly due to the energy sector rebound, as well as strong returns from other segments, including the materials sector. As we head into the second half of the year, asset managers must remain vigilant. NAFTA trade tensions, U.S./China trade friction and ongoing geopolitical issues will continue to reverberate through the markets, forcing asset managers to remain attentive to the ongoing volatility and its impact on portfolios and risk exposure.”

Copyright © 2020 Transcontinental Media G.P. Originally published on

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