Average Canadian DB pension plan returns 8.2% in Q4 2023: report

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Global equities returned 7.9 per cent for the quarter, amounting to a 16.3 per cent annual return, trailing the MSCI world index’s 8.7 per cent return for the quarter and 20.5 per cent annual return. Within the benchmark, information technology emerged as the top-performing sector, with a 14.6 return for the quarter and a 49.2 per cent return for the year. Real estate secured the second spot for the quarter with a 14.3 per cent return, while communication services claimed the second-highest performing sector for the year, with a 41.7 per cent return. Overall, the benchmark returned 20.5 per cent for the year.

While Canadian equities also provided solid returns for DB plans (7.5 per cent for the quarter and 10.9 per cent for 2023), they still fell behind their international counterparts due to lower exposure for growth-style stocks.

Canadian fixed income benefited from declining yields and tightening credit spreads to provide a 10.9 per cent return for the quarter and 7.8 per cent for the year. The FTSE Canada universe bond index trailed behind with returns of 8.3 per cent and 7.8 per cent for the quarter and the entire year respectively. Interest rate-sensitive long-term bonds led the pack with a 14.8 per cent return for the quarter, while short-term bonds returned 4.1 per cent.

“This quarter represents the third-best performance in over two decades, with notable [second] quarters in 2020 and 2009,” said Marijana Jovanovic, head of product transformation at RBC Investor and Treasury Services, in a press release. “Positive returns in both fixed income and equity markets during [the fourth quarter] were driven by investor optimism over potential near-term interest rate cuts amid decreasing inflationary pressures.”

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