RBC Investor Services Survey: Global Economy
and European Debt Fears Dampen Q2 Pension Returns
TORONTO, July 31, 2012 - Canadian pension plans gave
back some of their first quarter returns in Q2 2012, as concerns
over the European debt crisis and a weakening global economy
pushed Canadian equities lower, according to the latest survey
from RBC Investor Services, which maintains the industry's
most comprehensive universe of Canadian pension plans and
Within the $410 billion RBC Investor Services All Plan universe,
Canadian defined benefit (DB) pensions fell 1.1 per cent in
the quarter ending June 30, 2012 against gains of 4.5 percent
in the first quarter.
Canadian equities were the worst performing asset class for
the quarter, with the S&P/TSX Composite falling by 5.7
percent in Q2, wiping out its first quarter gains of 4.4 percent
to end 1.5 percent lower over the first half of the year.
Pensions' foreign equity investments underperformed the MSCI
World (CAD) by 0.4 percent, reversing a trend of positive
returns for the past two quarters, while the MSCI World index
fell 3.2 percent in Canadian dollars compared to 4.3 percent
in local currency.
"After the sustained rally in the previous two quarters,
pension plans felt the heat of the ongoing saga in Europe
and the resulting domino effect on Canadian and foreign equities,"
said Scott MacDonald, Head, Pensions, Insurance, and Sovereign
Wealth Strategy for RBC Investor Services. "The weakening
of the Canadian dollar lessened the impact of falling foreign
equities on Canadian DB plans, but the continuing downward
pressure on stock prices is eroding the gains of plans seeking
higher returns from equities."
Within the S&P/TSX Composite, seven of 10 sectors declined
in the second quarter. Information Technology fell the most,
down 17.8 per cent, while two of the largest sectors, Energy
and Materials, fell by 7.3 per cent and 10.8 per cent respectively
due to concerns about global demand.
Overall, pensions' Canadian equity holdings outperformed
the S&P/TSX Composite by 0.5 per cent, but domestic bonds
were the best performing asset class for the quarter, with
the median Pension return of 2.4 percent marginally outperforming
the DEX universe by 0.1 percent. Long-term bonds were up 4.0
percent, making them the best performing sector in the DEX
Universe for the second quarter.
"Pension plans managed to outperform the S&P/TSX
Composite Index in the second quarter, being underweight in
Energy and Materials, two of the largest sectors that underperformed
the S&P/TSX Composite," added MacDonald. "But
continued worries surrounding Europe and the slowdown in the
Chinese and US economies had investors seeking safety in government
bonds once again."
About RBC Investor Services
RBC Investor Services is a premier provider of investor services
to asset managers, financial institutions and other institutional
investors worldwide. Our unique approach to domestic and cross-border
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of Royal Bank of Canada, one of the largest and most financially
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