The value of Canadian pension plans suffered the largest quarterly decline in a decade as the credit crisis caused equity markets around the world to drop.

RBC Dexia Investor Services says the value of plans tumbled 8.6% during the third quarter of 2008.

“Year-to-date, Canadian pensions are down 10.1%,” says Don McDougall, RBC Dexia’s director of advisory services. “It hasn’t been pretty—and judging by the performance in October so far, the situation is not getting any better.”

The hardest-hit equity class was Canadian equity, which plunged 18.2% as weakening commodity prices sent the S&P/TSX composite index lower. Materials stocks fell 33.6%, while energy stocks dropped 28.3% in Q3.

“Fortunately, most Canadian funds had already trimmed their exposure to resources,” McDougall explains. “By locking in gains earlier in the year, pensions deftly outperformed the index by 1.7%.”

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Global equities fell 11.2%, matching the MSCI World Index in the latest quarter. Ironically, American stocks and a stronger U.S. dollar helped cushion the blow. In Canadian dollar terms, the MSCI EAFE index slumped by 16.8% over the quarter, an 18-year record decline.

In domestic bonds, Canadian pensions slipped 1.5% in the quarter—far below the 0.4% dip in the DEX Universe broad market benchmark. Spreads varied considerably: longer maturity bonds dropped 3.1%, while real return bonds lost 9%—their worst quarter in 14 years.

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