Pension assets remained unchanged during the second quarter of 2013, as a spike in interest rates in June negated advances in April and May.
A survey from RBC Investor & Treasury Services finds that DB pensions returned 0% for the quarter ending June 30, 2013, keeping year-to-date results at 4.5%.
“Market volatility returned in June following the Fed’s statements regarding its commitment to quantitative easing,” says Scott MacDonald, the company’s head of pension segment development. “While all DB plans benefit from rising long-term bond yields as pension liabilities are reduced, those with risk mitigating liability-driven investment strategies were the hardest hit during the quarter.”
Bonds had their largest three-month decline since 1994, losing 2.5% in the quarter and 1.7% over six months.
Canadian equities also lost ground within pension plans, declining 1.2% compared with the S&P/TSX Composite Index, which was down 4.1% in the quarter.
Foreign stocks provided the needed support this quarter, gaining 4.7%, mostly due to continued positive performance in the U.S. equities market. This compares to the MSCI World Index, which advanced 4.5% in the quarter.
“Unhedged pension plans benefited from the Canadian dollar’s weakness against most major currencies, with [foreign exchange] returns accounting for over half of the gains,” MacDonald adds. “Foreign equities continue to lead year to date—up 15.4% in Canadian dollar terms.”
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