Surging equity markets have lifted Canadian pension plan assets by 9.5% over the past three months, according to a recent survey from RBC Dexia.
The survey finds that pension funds have reaped year-to-date investment gains of 6.5%.
“Given last year’s brutal pull-back, plan sponsors are breathing a sigh of relief to be finally moving into positive territory, especially after the poor January and February start,” says Don McDougall, director of advisory services for RBC Dexia.
McDougall says that Canadian equity took top marks as an asset class as the S&P TSX Composite index gained 20%, its best three-month showing since 1999. “The two largest sectors, financials (up 34.5%) and energy (up 21.6%) accounted for most of the increase, remarkably pensions were generally under-exposed to both but still managed to beat the index by 1% this quarter on the strength of superior stock selection.”
Foreign stocks also posted a good showing, pushing the MSCI World Index up 16.5% in local currency terms during the quarter. “For unhedged Canadian-based investors, a stronger loonie—particularly against the U.S. dollar—slashed foreign equity returns to 11%,” says McDougall.
Canadian pensions continued to profit from domestic bonds as corporate spreads narrowed considerably from their peaks, earning 2.3% in the quarter and 4.3% year-to-date.
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