Canadian defined-benefit pension plans, buoyed by rebounding Canadian equity returns, posted Q3 2017 returns of 0.4%, says RBC Investor and Treasury Services All Plan Universe. This marks the sixth-straight quarter of growth for Canadian pension plans. Q2 total returns were 1.4%.

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Canadian equity returns reverted to positive territory with returns of 3.8% in Q3 2017, compared with -1.9 last quarter. The TSX Composite Index also returned to the black, posting returns of 3.7%, up from -1.6% last quarter.

A year ago, Canadian equities posted returns of 6.7%, while the TSX Composite posted a return of 5.5%. Resources, materials and energy helped fuel those gains.

Geopolitical activity continued to reverberate through global equity markets, which posted 1.2% returns in Q3 2017, down from 2.3% in Q2 2017 and 6.7% a year ago. Comparatively, the MSCI World Index gained 1% in Q3 2017, a decline from 1.3% in Q2 2017.

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Fixed income drops

Canadian fixed income returns moved lower, posting a 2% loss this quarter compared to a 1.4% gain in Q2 2017. The FTSE TMX Universe Canadian Bond Index retreated by 1.8% in Q3 2017, compared to a 1.1% gain in Q2 2017.

“The energy sector posted stronger returns in September due to a rebound in oil prices, which helped lift Canadian equities, while the bond market slipped into negative territory after strong Canadian economic growth led the Bank of Canada to raise interest rates for the first time in seven years,” says James Rausch, head of client coverage, Canada, RBC investor and treasury services. “The rate increase helped boost the financial services sector, as well as drive short-term bond yields and the Canadian dollar higher.”

He says these developments will be considered by Canadian pension fund managers as they assess their asset allocations and look ahead to Q4 and year-end returns.

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Historic performance of Canadian defined-benefit pension plans

PeriodReturn (%)PeriodReturn (%)
Q3 20170.4Q2 2015-1.6
Q2 20171.4Q1 20156.6
Q1 20172.9Q4 20142.7
Q4 20160.5Q3 20141.1
Q3 20164.2Q2 20143.0
Q2 20162.9Q1 20144.8
Q1 20160.0Q4 20136.1
Q4 20153.1Q3 20133.6
Q3 2015-2.0Q2 20130.0

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