The average Canadian defined benefit pension plan posted a median return of 1.1 per cent in the second quarter of 2024, according to a new report by RBC Investor Services.
The report, which tracks performance and asset allocation across Canadian DB plans, also found that the plans saw a return of 4.4 per cent for the first half of 2024.
Read: Average Canadian DB pension plan returns 3.6% in Q1 2024: reports
The results were credited to a strong performance from global equities (3.1 per cent) despite underperforming the MSCI world index (3.8 per cent). The information technology (12.6 per cent) and communication services (9.3 per cent) sectors lead the way for this asset category. U.S. equities (5.4 per cent) outperformed their international counterparts due to the strong performance of the IT sector.
However, Canadian equities lagged behind their global counterparts due to a negative 0.6 per cent return for the quarter, which matched the TSX Composite Index’s negative 0.5 per cent result. Losses from the financials (negative 1.2 per cent) and industrials (negative 3.4 per cent) sectors dragged down the performance of domestic equities despite strong results in the quarter from materials (7.4 per cent).
In terms of fixed income assets, plans posted a return of 0.8 per cent which was in line with the 0.9 per cent return of the FTSE Canada Universe Bond Index. Short-term FTSE Canada Universe bonds (1.2 per cent) outperformed long-term bonds (0.2 per cent) during the quarter.
“The market continues to experience volatility due to ongoing geopolitical tensions [and] inflation trended favourably . . . following the Bank of Canada’s rate cut [in June],” said Isabelle Tremblay, director client solutions and asset owner segment lead at RBCIS, in a press release. “With the consecutive rate adjustment announced in July, plan managers are continuing to adapt their strategies and navigate the evolving environment.”
Read: Liquidity status guiding Canadian pension funds through near-term market volatility: report
A separate report by Northern Trust Corp. found the median Canadian DB plan also returned 1.1 per cent in the first three months of 2024 and 3.5 per cent so far in 2024.
The report said the Bank of Canada and the European Central Bank delivered a new less restrictive tone in their policy to stave off inflation while other central authorities continue with their cautious commentary. It found the Canadian fixed income market delivered a 0.9 per cent return, while Canadian equities declined negative 0.5 per cent during the quarter.
“As we conclude the first half of 2024, a theme of sustainability permeated across the globe,” said Katie Pries, president and chief executive officer at Northern Trust Canada, in a press release. “We have seen it through central bank actions as policymakers seek a sustainable path of inflation in an effort to normalize monetary policy. This theme continues to echo across the Canadian pension plan landscape as plan sponsors demonstrate resilience and agility while navigating the economic elements of high interest rates, persistent inflation and waves of volatility.”
Read: Average funded ratio of Canadian DB pension plans up 2% in Q2 2024: report