Despite a downturn in market sentiment, pension plans posted a small gain in the most recent quarter according to an RBC report
Canadian pension plans have been hedging their bets as market sentiment turned negative.
The markets reversed in September following the buoyancy of July and August, easing the quarterly returns for Canada’s defined benefit pension plans.
Figures from the RBC Investor & Treasury Services All Plan Universe show that plans returned 0.6% in the quarter ended September 30, 2021, bringing year-to-date returns to 4.5%.
"Market volatility returned in September on account of global concerns over the impact of labour shortages, strained supply chains and rising consumer prices – all due to the Covid-19 Delta variant," stated Niki Zaphiratos, Managing Director and Head, Asset Owners, Client Coverage, Canada, for RBC Investor & Treasury Services.
Canadian equities returned just 1.5% over the quarter, a small contribution to the year-to-date return of 18.5%, with the S&P/TSX Composite Index gaining just 0.2% over the quarter.
The top performing sectors were energy (up almost 41% over the three- month period), consumer staples, and industrials. However, materials (impacted by weaker gold stocks) and consumer discretionary sectors were the laggards.
International holdings
For international equities held by Canadian DB pension plans, performance was similar to domestic stocks with a 1.4% rise, while the MSCI World Index gained 2.3%.
Growth stocks outperformed value stocks, and US equities fared better than non-US holdings.
Fixed income securities underperformed and posted a 0.8% loss in the quarter and a 5.7% decline over 9 months.
"Investors are watchful in anticipation of a debt limit showdown in December and the ongoing struggles to reach an infrastructure deal and funding agreement in the US," said Zaphiratos. "Central banks are already moving away from some of the ultra-loose monetary policies as inflation pressures persist. In response, plan managers have been increasingly investing in a greater variety of asset classes such as private equity, real estate and infrastructure that can hedge against inflation."
