First quarter returns only just remained in positive territory
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The first quarter of 2018 was a tough one for Canada’s defined benefit pension plans.
A 3.9% slump for Canadian equities in the quarter saw plans’ returns only just remain positive at 0.2%, down sharply from the 4.4% of Q4 2017.
The figures from RBC Investor & Treasury Services’ All Plan Universe, show that the decline for equities was a turnaround from their 4.2% gain in the fourth quarter of 2017, and the 2.4% gain of Q1, 2017.
There was also a retreat for global equities at 2% returns compared to 6.1% in Q4 2017 as global uncertainty and geopolitics weighed down investor sentiment.
“The first quarter of 2018 was full of instability and volatility, with Canadian equities taking the biggest hit,” said Ryan Silva, Director, Head of Pension and Insurance Segments, Global Client Coverage RBC Investor & Treasury Services. “The health care and energy sectors, uncertainty around NAFTA trade negotiations as well as potential interest rate hikes weighed down the TSX Composite Index and other key indices.”
Silva added that asset managers should remain vigilant to “ongoing volatility for the remainder of the year” and he recommends maintaining a diversified portfolio to actively manage risk exposure.
NAFTA, loonie both dented returns
The report also highlights the impact of ongoing NAFTA talks which affected returns for other investments too.
Canadian fixed income assets posted a small return of 0.1% in Q1 2018, compared to 2.2% in Q4 2017 while the FTSE TMX Universe Canadian Bond Index returned 0.1% in Q1 2018, down from 2% in Q4 2017.
The Canadian dollar was the worst performing major currency during Q1 2018.
The U.S. dollar appreciated versus the Canadian dollar by 2.9% due to the uncertainty around trade talks and its impact on the Canadian economy and its monetary policy.
