Canadian pension plans made significant gains in the third quarter as increased monetary support from central banks reassured global markets and increased investors’ appetite for taking on risk, according to the latest survey from RBC Investor Services.
Within the $410 billion RBC Investor Services All Plan universe, Canadian DB pension plans gained 3.2% in the quarter ending Sept. 30, 2012, against a loss of 1.1% in the second quarter.
The median year-to-date return for Canadian DB plans is 6.6%.
Equities rebound
After being the worst-performing asset class in the second quarter, Canadian equities rebounded sharply in Q3, with the S&P/TSX Composite Index increasing 7%, bringing year-to-date performance to 5.4%.
DB plans’ Canadian equity holdings returned 6.2% for the quarter, underperforming the S&P/TSX Composite Index by 0.8% as they were underweight in materials and returned only 6.7% for that sector.
Returns from foreign equities were dampened by the Canadian dollar strengthening against the greenback and the euro.
Canadian DB pension foreign equity holdings edged the MSCI World Index (CAD) by 0.1% in the third quarter.
Bond results
The DEX Universe Bond Index remained in the positive, returning 1.2% over the third quarter, compared with a 2.3% return in the second quarter.
The median domestic bonds return of 1.6% for Canadian DB plans outperformed the DEX Universe by 0.4%.