Canadian DB assets rise in Q3

Within the $520-billion RBC Investor & Treasury Services All Plans universe—the industry’s most comprehensive universe of Canadian pension plans—DB pension plans returned 1.1% during the third quarter of 2014, resulting in a year-to-date increase of 8.6%.

“While Canadian plan assets have performed strongly in 2014, the steady decline in long-term yields means plan liabilities have likely increased as well,” says Scott MacDonald, managing director of pensions with RBC Investor & Treasury Services.

Foreign equities were the best performing asset class in the third quarter as the MSCI World Index gained 2.7% in Canadian dollar terms. “Foreign currency gains made up the lion’s share of the quarterly return, with the U.S. dollar gaining 4.9% against the loonie,” says MacDonald. Year-to-date results show foreign assets up 8.4%, trailing the MSCI World Index benchmark by 0.9%.

Canadian equities were dragged down by falling commodity prices—the S&P/TSX Composite Index fell by 0.6% in the third quarter, bringing year-to-date returns to 12.2%. “The decline in energy and material stocks more than offset gains in the other TSX sectors,” says MacDonald. Pensions underperformed the index for the quarter by 0.5% and by 0.7% year to date.

Bonds saw lower gains in September but still returned 1.1% for the quarter and 6.5% year to date, says MacDonald. As in the first half of 2014, long-term bonds continued to produce higher returns with the FTSE/TMX Long Term Bond Index, posting 2.3% for the quarter and 11.6% year to date.

Related articles:

• Canadian pension assets move higher
• 2014 Top 100 Pension Funds Report: Celebrate good times
• Why you need to manage pension risk