Pension returns achieved a sixth straight quarter of growth
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The pick-up in equities returns in the third quarter of the year has buoyed the yields of Canadian defined benefit pension plans.
According to RBC Investor & Treasury Services, defined benefit pension plans posted returns of 0.4%, marking the sixth straight quarter of growth.
This followed the equity returns of 3.8%, reversing the slump of 1.9% in the previous quarter. The TSX Composite Index also returned from the negative side, posting returns of 3.7%, up from a decline of 1.6% in the second quarter.
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To recall, Canadian equities reported robust returns a year ago, up 6.7% with the TSX Composite Index rising to 5.5%. RBC Investor & Treasury Services head of client coverage in Canada James Rausch it was the resources, materials and energy sectors that helped the market reached that feat. In the most recent quarter, he said the market got a shot in the arm again from the energy sector.
"The energy sector posted stronger returns in September due to a rebound in oil prices which helped lift Canadian equities," he said.
In terms of Canadian fixed income, returns were dismal, posting a 2% loss from a 1.4% gain in the previous quarter. Meanwhile, the FTSE TMX Universe Canadian Bond Index retreated to a negative 1.8% growth.
Rausch said the bond market slipped into negative zone following the strong Canadian economic growth which led the Bank of Canada to raise interest rates for the first time in seven years.
"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," he explained.
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According to RBC Investor & Treasury Services, defined benefit pension plans posted returns of 0.4%, marking the sixth straight quarter of growth.
This followed the equity returns of 3.8%, reversing the slump of 1.9% in the previous quarter. The TSX Composite Index also returned from the negative side, posting returns of 3.7%, up from a decline of 1.6% in the second quarter.
Also Read: RRSP contribution limits need to be higher – report
To recall, Canadian equities reported robust returns a year ago, up 6.7% with the TSX Composite Index rising to 5.5%. RBC Investor & Treasury Services head of client coverage in Canada James Rausch it was the resources, materials and energy sectors that helped the market reached that feat. In the most recent quarter, he said the market got a shot in the arm again from the energy sector.
"The energy sector posted stronger returns in September due to a rebound in oil prices which helped lift Canadian equities," he said.
In terms of Canadian fixed income, returns were dismal, posting a 2% loss from a 1.4% gain in the previous quarter. Meanwhile, the FTSE TMX Universe Canadian Bond Index retreated to a negative 1.8% growth.
Rausch said the bond market slipped into negative zone following the strong Canadian economic growth which led the Bank of Canada to raise interest rates for the first time in seven years.
"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," he explained.
For more of Wealth Professional's latest industry news, click here.
Related stories:
Morningstar shows energy rose in September
Mackenzie announces China equity fund
