Rebounding Canadian equities drive pension returns higher in Q3

Canadian defined benefit pension plans, buoyed by rebounding Canadian equity returns, posted Q3 2017 returns of 0.4 per cent according to the $650 billion RBC Investor & Treasury Services All Plan Universe, the industry’s most comprehensive universe of Canadian pension plans. This marks the sixth straight quarter of growth for Canadian pension plans. Q2 total returns posted a 1.4 per cent gain.

Canadian equity returns reverted to positive territory with returns of 3.8 per cent in Q3 2017, compared with -1.9 in Q2 2017. The TSX Composite Index also returned to the black, posting returns of 3.7 per cent, up from -1.6 per cent in Q2 2017. A year ago, Canadian equities posted strong returns of 6.7 per cent while the TSX Composite Index posted a return of 5.5 per cent. The resources, materials and energy sectors helped fuel the 2016 gains.

 Canadian Fixed Income returns moved lower, posting a 2 per cent loss this quarter compared to a 1.4 per cent gain in Q2 2017. The FTSE TMX Universe Canadian Bond Index retreated -1.8 per cent in Q3 2017, compared to a 1.1 per cent 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,” said James Rausch, Head of Client Coverage, Canada, RBC Investor & Treasury Services. “The rate increase helped boost the financial services sector as well as drive short-term bond yields and the Canadian dollar higher. These developments will be taken into account by Canadian pension fund managers as they assess their asset allocation and look ahead to Q4 and year-end returns.”

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

 The U.S. dollar continued to slide against the Canadian dollar, falling further into the red at -3.7 per cent, down from -2.6 per cent in Q2 2017.

HISTORIC PERFORMANCE

 

Period

Return (%)

Period

Return (%)

Q3 2017

0.4

Q2 2015

-1.6

Q2 2017

1.4

Q1 2015

6.6

Q1 2017

2.9

Q4 2014

2.7

Q4 2016

0.5

Q3 2014

1.1

Q3 2016

4.2

Q2 2014

3.0

Q2 2016

2.9

Q1 2014

4.8

Q1 2016

0.0

Q4 2013

6.1

Q4 2015

3.1

Q3 2013

3.6

Q3 2015

-2.0

Q2 2013

0.0