Canadian DB pension funds posted modest gains in second quarter

The second quarter of 2019 brought modest gains for Canada’s defined benefit pension funds.

Figures from RBC Investor & Treasury Services show returns of 2.7% for Q2 2019, down from 7.2% in the previous quarter. The All Plan Universe shows that 6-month returns sit at 10.2%.

The lower returns reflect a slowdown in the TSX Composite Index which returned just 2.6% compared to 13.3% in the first quarter of 2019; and weaker returns from global equities – 1.8% in Q2 2019 compared to 9.9% in the previous quarter.

Canadian equity returns for Canadian pension plans were also measured in Q2 2019, returning 2.3% versus 12.4% in the first three months of the year.

“The first half of 2019 has been positive for Canadian defined benefit pension plans and all indicators show that the Canadian economy is healthy, but small cracks are beginning to appear,” said Ryan Silva, Director, Head of Pension and Insurance Segments, Global Client Coverage, RBC Investor & Treasury Services.

He noted that Canadian investors are growing increasingly aware of the impact of geopolitical and trade unrest along with slowing global economies.

“Second quarter growth can be considered healthy, but modest, and managers will need to maintain their cautious approach and actively manage their portfolios and risk exposure,” he added.

Additional stats

• Canadian fixed income returns sat at 3.7% in Q2, down from 5.6% in Q1 2019.
• The FTSE Canada Universe bond index returned 2.5% in Q2 2019 compared to 3.9% in Q1 2019. Canadian bond yields also fell during Q2 2019.
• Seven of 11 sectors in the TSX Composite Index were positive in Q2 2019. All 11 sectors posted gains in Q1 2019.

Historic performance