Canadian defined benefit (DB) pension plans rallied significantly in the second quarter of the year, posting a median return of 9.6%, according to the Royal Bank of Canada.
The median gain in the RBC Investor & Treasury Services All Plan Universe, which tracks the performance and asset allocation of a cross-section of assets under management across Canadian DB plans, represents a sharp reversal from its -7.1% median return in the first quarter of 2020. On a year-to-date basis, the median DB plan’s return was 1.4%
Gains in the quarter followed a series of aggressive fiscal and monetary support measures introduced in March to address the impact of Covid-19 on the global economy.
“The actions the Bank of Canada and the federal government have taken over the past months to support the economy and financial system are unprecedented — not even seen following the 1929 stock market crash — and the markets have been quick to respond,” said David Linds, managing director and head of asset servicing in Canada at RBC Investor & Treasury Services, in a press release.
The median DB plan generated 13.9% returns in global equities holdings in the quarter, compared to 14.2% for the benchmark MSCI World index; 13% returns in Canadian equities compared to 17% for the TSX Composite; and 8.7% returns in fixed-income securities, compared to 5.9% for the FTSE TMX Canada Universe Bond Index.
“In this environment where so many of us are at home, it continues to be somewhat of a winner-takes-all scenario, with the market being driven primarily by companies that have continued to exhibit growth and safe haven investments — such as precious metals,” Linds said. “The long-term implications of Covid-19 on the economy are unclear.”