Canadian pension plans grow for fourth straight quarter

Canadian defined benefit pension plans returned 2.9% in Q1 2017, marking the fourth straight quarter of growth for Canadian pension plans, reveals the RBC Investor & Treasury Services All Plan Universe. This performance builds on a strong 2016 annual return of 6.8%.

Read: Canadian equities lifted DB pension returns in 2016

“Canadian pension plan returns, led by strength in Canadian and global equities, are off to a good start in 2017,” says James Rausch, head of client coverage for Canada at RBC Investor & Treasury Services, in a release. “However, vigilance is still required. While ongoing business investment in Canada could spur growth, asset managers will undoubtedly be focusing on maintaining a diversified portfolio and actively managing their risk exposure in the period ahead, given evolving macro-economic and political forces around the world.”

Positive global economic conditions in Q1 2017 helped lift global equities in delivering a return of 6.2%, up from 3.0% in Q4 2016. The MSCI World Index reflected a similar trend, returning 5.8% for Q1 2017, up from 3.9% in Q4 2016.

Canadian equity returns retreated slightly quarter over quarter, returning 2.3% in Q1 2017, down from 5.7% in Q4 2016. The TSX Composite Index followed a similar course, gaining 2.4% in Q1 2017 yet down from 4.5% in Q1 2016, primarily due to weakness in the energy sector at the beginning of the year.

Canadian fixed-income assets rebounded in Q1 2017, posting a return of 1.4%, compared to a Q4 2016 loss of 3.4%. The FTSE TMX Universe Canadian Bond Index also returned to positive territory, posting a Q1 2017 gain of 1.2%. The index declined by 3.4% in Q4 2016. The Canadian bond market remained stable against a number of national and international events, including the delivery of the Canadian federal budget, a U.S. interest rate hike and continuing Brexit developments.

Read: What to do about those lower returns

The foreign exchange market saw the U.S. dollar depreciate against the Canadian dollar in Q1 2017, losing 0.6% compared to a Q4 2016 gain of 2.0%. Federal Reserve rate hikes and the cautious views of the Bank of Canada may continue to impact the currency pair.

The table below shows the historical performance of Canadian defined benefit pension plans in the RBC universe.

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Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.