New figures show decreased quarter-on-quarter performance, suggesting need for defensive approach
Canadian defined-benefit pension plans saw more muted returns in Q3 2019, according to new figures from RBC Investor & Treasury Services.
Based on the RBC Investor & Treasury Services All Plan Universe, Canada’s defined-benefit pension plans achieved a median return of 1.7%. The index has been on a continual decline this year, with median returns of 2.7% in Q2 and 7.2% in Q1.
“While markets remain volatile, the ongoing trade tensions between the U.S. and China, in addition to the geopolitical turbulence surrounding Brexit, continue to propel very modest pension plan returns,” said Ryan Silva, director, Client Coverage, RBC Investor & Treasury Services.
The tame performance of pension plans in Q3 came as the TSX Composite Index returned 2.5%, a marginal decline from 2.6% in the previous quarter. Of 11 sectors, 9 were reported to post positive returns, led by Utilites and Real Estate.
Canadian equities were also said to have returned 2.5% in Q3, a marginal improvement from their Q2 returns of 2.3%.
A look at the FTSE TMX Canada Universe showed a 1.2% return in Q3, which came as Canadian bond yields continued to drop alongside global bonds, resulting in longer-term bonds outperforming their shorter-term counterparts.
Returns for Canadian Fixed Income Investments in Q3 were registered at 1.9%, a 1.8% decline from Q2.
Meanwhile, the MSCI World Index gained slightly to reach 1.9%, a 0.1% advance over Q2. Global equity returns declined significantly, decelerating from 1.8% in Q2 to 0.8% in Q3.
“Plan sponsors are encouraged to consider taking a defensive approach to lower investment risks, such as moving into private assets, blue chips and other relatively safe investments with stable track records,” Silva said.
