Pensions post meagre Q2 gains: survey

Faltering global equity markets largely erased fixed income advances within pension funds during the June quarter, according to a survey just released by RBC Dexia Investor Services.

Within the $340 billion RBC Dexia universe, Canadian pension assets rose 0.2% in the three months ending June 2011, nudging year-to-date performance to 2.2%. “Concerns over the resilience of the U.S. recovery and the European debt crisis sparked a correction-like pull back, but a late quarter rebound softened the blow,” said Don McDougall, director of advisory services for RBC Dexia.

Canadian equity was the hardest hit asset class in the quarter as the S&P TSX Composite index dropped 5.2%, wiping out nearly all March quarter gains.

“Lower commodity prices adversely affected the top heavy energy and materials sectors. The technology sector was also hit, the most dramatic being Research in Motion, which fell 49% over this period,” noted McDougall. “The good news is that most pensions were underexposed to both the Materials and Energy sectors and this contributed to their outperformance against the market by 0.4%. Year-to-date, pensions are up 0.2%—in line with the S&P TSX benchmark.”

Foreign stocks remained in positive territory thanks to active management as Canadian plans gained 0.1% in the quarter against a 0.3% drop in the MSCI World index. Year-to-date results show pensions up 2.1% in Canadian dollar terms for this asset class.

“Currency movements have tended to cancel themselves out this year as the strength of the Canadian dollar against the US dollar largely offset it’s weakness against the Euro and Yen,” McDougall added.

Bonds provided needed support, earning 2.8% in the quarter despite a late June sell-off.

“As inflationary fears subdued and a slower global growth scenario emerged, strength came from the longer end of the curve with long-term bonds advancing by 3.9% versus 2.5% for the DEX Universe bond index,” McDougall said.

Staff

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