Canadian pension plans suffered reverses in the second half of 2007 as the spreading global credit crunch pushed stocks lower, according to a RBC Dexia Investor Services.
Pension funds lost 0.5% in the fourth quarter of last year and posted a small gain of 1.5% for 2007.
“2007 was tumultuous, as the soaring loonie and spiking energy prices reached record highs, against a backdrop of tightening global credit and recessionary pressures in the U.S.,” says Don McDougall, the company’s director advisory services. “However, after four consecutive years of double-digit annual returns, some weakening was in the cards.”
Canadian equities were the dominant asset class, producing a respectable 8.5% over the year, but they still lagged the S&P TSX Composite Index by 1.3%.
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Also in 2007, the strength of the Canadian dollar was a factor for investors. The MSCI World Index’s 4.7% gain in local currency terms translated into a loss of 7.5% for the year, once exchange rates were taken into account.
And Canadian bonds earned only 3.4% for the year—their worst annual performance since 1999.
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