Canadian defined-benefit (DB) pensions gained a median 0.6% in the third quarter, down from 4.4% in the previous quarter, according to a new report from RBC Investor & Treasury Services.
RBC attributed the more modest performance of the RBC Investor & Treasury Services All Plan Universe to market volatility caused by labour shortages, supply chain disruptions and rising consumer prices.
The third-quarter DB returns brought the year-to-date results to 4.5%.
Canadian equities returned 1.5% in Q3, but the asset class’ year-to-date results of 18.3% were more impressive. In comparison, the S&P/TSX Composite Index was up by only 0.2% in Q3.
Foreign equities held by Canadian DB plans nearly matched Canadian equities in Q3, returning 1.4%. This was below the benchmark MSCI World index, which advanced 2.3% over the same period. The report noted that growth stocks outperformed value stocks for the second consecutive quarter.
“Unhedged Canadian pension plans benefited from weakness in the Canadian dollar, which depreciated against most major trading currencies over the quarter,” the report added.
Fixed income returns were negative for Canadian DB plans in the third quarter, returning -0.8%, after posting a 3% return in the previous quarter. However, fixed income returns were -5.7% over the past nine months.
The report observed that corporate bonds performed better than government bonds, while longer-duration bonds underperformed their shorter-duration counterparts.