It was a negative quarter for Canada’s defined benefit (DB) pension plans, which slipped 1.1% in the period ending June 30th according to the latest survey from RBC Investor Services. The poor performance reflects increased stress in Canadian equity markets which are under pressure as the European debt crisis continues and the global economy gets weaker.
RBC Investor Services’ All Plan universe represents $410 billion in Canadian DB assets. Q1 was kinder to pension funds, delivering a higher return of 4.5% for the quarter.
Other key highlights from the report include:
— Canadian equities were the worst performing asset class for the quarter, with the S&P/TSX Composite falling by 5.7 percent in Q2, wiping out its first quarter gains of 4.4 percent to end 1.5 percent lower over the first half of the year.
— Foreign equity investments underperformed the MSCI World (CAD) by 0.4 percent, reversing a trend of positive returns for the past two quarters, while the MSCI World index fell 3.2 percent in Canadian dollars compared to 4.3 percent in local currency.
— Within the S&P/TSX Composite, seven of 10 sectors declined in the second quarter. Information Technology fell the most, down 17.8 per cent, while two of the largest sectors, Energy and Materials, fell by 7.3 per cent and 10.8 per cent respectively due to concerns about global demand.
— Domestic bonds were the best performing asset class for the quarter, with the median Pension return of 2.4 percent marginally outperforming the DEX universe by 0.1 percent. Long-term bonds were up 4.0 percent, making them the best performing sector in the DEX Universe for the second quarter.