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Pension assets increased for a fourth successive quarter as global markets maintained their winning streak during the second quarter, according to RBC Investor & Treasury Services.
Within the $520-billion RBC Investor & Treasury Services All Plans universe, DB pension plans returned 3%, bringing year-to-date results to 7.8%.
“While assets continue to gain momentum, we can also infer that liabilities have also increased as longer-term bond yields have come down,” says Scott MacDonald, managing director, pensions, for RBC Investor & Treasury Services.
Canadian equity remained the top-performing asset class as the S&P/TSX Composite Index gained 6.4% in the quarter and 12.9% on a year-to-date basis.
The financials and energy sectors accounted for the bulk of the increase, with energy leading the way as concerns over Iraq helped boost oil stocks, he explains. “Pensions kept pace with the index for the quarter but still lag by 0.2% year to date.”
Bonds fared better than most expected as a result of declining interest rates, gaining 2.1% in the quarter and 5.5% over six months. Strength continued to come from the longer end of the curve, pushing year-to-date totals to 9.1% for FTSE/TMX long-term bonds and 10.7% for FTSE/TMX real return bonds.
Foreign stock markets also moved higher for the eighth consecutive quarter as the MSCI World Index gained 4.4% in local currency terms, but foreign exchange losses resulted in advances of only 1% for Canadian pension plans.
“Currency volatility has been a key factor affecting performance this year as the Canadian dollar rebounded back to year-end levels against the U.S. dollar and the euro,” MacDonald adds. Year-to-date results show foreign assets up 6.4%, which is in line with the world benchmark.
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