Pension assets rose for a fifth successive quarter, says the latest survey from RBC Investor & Treasury Services.
That’s despite concerns over anemic economic growth in the Eurozone, and escalating global issues during the three months ending in September.
In particular, defined benefit pension plans offered by RBC Investor & Treasury Services returned 1.1% per cent during Q2 2014, bringing year-to-date results to 8.6%.
“Canadian plan assets have performed strongly in 2014,” says Scott MacDonald, managing director of Pensions at RBC Investor & Treasury Services. “[However], the steady decline in long-term yields means plan liabilities have likely increased as well.”
The drop in yields is partially due to Canadian equities being dragged down by falling commodity prices. The S&P/TSX Composite Index fell by 0.6% in Q3, bringing year-to-date returns to 12.2%.
Unfortunately, “the decline in energy and material stocks more than offset gains in the other TSX sectors,” says MacDonald. As such, pensions underperformed the index for the quarter by 0.5%, and by 0.7% year-to-date.
On the upside, “bonds gave back some of their gains in September, but still returned 1.1% for the quarter, and 6.5% year-to-date. As in the first half of the year, long-term bonds continued to generate higher returns with the FTSE/TMX Long Term bonds index returning 2.3% for the quarter, and 11.6% year-to-date.”
Further, foreign equities were the best performing asset class in the third quarter, as the MSCI World Index gained 2.7% in Canadian dollar terms. “Foreign currency gains made up the lion’s share of the quarterly return, with the U.S. dollar gaining 4.9% against the loonie.”
In fact, year-to-date results show foreign assets up by 8.4%, trailing the MSCI World Index benchmark by only 0.9%.