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RBC Investor Services Survey: Canadian Pensions Recover in Q3 Buoyed By Positive Performance Across Asset Classes

TORONTO, October 26, 2012 - Canadian pension plans made significant gains in the third quarter as increased monetary support from central banks reassured global markets and increased investors' appetite for taking on risk, according to the latest survey from RBC Investor Services, which maintains the industry's most comprehensive universe of Canadian pension plans and money managers.

Within the $410 billion RBC Investor Services All Plan universe, Canadian defined benefit (DB) pensions gained 3.2 per cent in the quarter ending September 30, 2012 against a loss of 1.1 per cent in the second quarter. The median year-to-date return for Canadian DB plans is 6.6 per cent.

"Canadian defined benefit pension plans returned to positive territory, driven by the Financials, Energy and Materials sectors as global markets continued their liquidity-driven climb from the summer lows," said Scott MacDonald, Head, Pensions, Insurance, and Sovereign Wealth Strategy for RBC Investor Services. "Despite headwinds from deteriorating economic conditions in Europe and China, as well as lacklustre economic news from the US, this rally was driven by major central banks pledging further monetary support which led to a positive performance for commodities and energy-based stocks."

After being the worst performing asset class in the second quarter, Canadian equities rebounded sharply in Q3, with the S&P/TSX Composite increasing 7.0 percent and bringing year-to-date performance up to 5.4 per cent. All 10 sectors of the S&P/TSX Composite had positive gains in Q3, with Materials and Energy leading the way, up by 13.1 and 8.5 per cent respectively,

DB Pension plans Canadian Equity holdings returned 6.2 per cent for the quarter, underperforming the S&P/TSX Composite by 0.8% as they were underweight in Materials and returned only 6.7 per cent for that sector.

Returns from Foreign Equities were dampened by the Canadian dollar strengthening against the US dollar and the Euro. The S&P500 returned 6.4 per cent in USD versus 2.7 per cent in CAD and the MSCI World Index returned 5.6 per cent in local currencies versus 3.0 per cent in CAD. Canadian DB Pension Foreign Equity holdings edged the MSCI World (CAD) by 0.1 percent in the third quarter.

The DEX Universe Bond Index remained in the positive, returning 1.2 per cent over the third quarter compared to 2.3 per cent return in the second quarter as central banks around the world continued to signal their commitment to bolstering their respective economies.

"Within the DEX Universe index, the corporate segment outpaced its government counterparts, indicating a flight to risk as managers went after additional yield," added MacDonald.

The median Domestic Bonds return for Canadian DB Pensions of 1.6 per cent outperformed the DEX Universe by 0.4 per cent.

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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 solutions, combined with award-winning client service and the expertise of 5,500 professionals in 15 markets, helps our clients achieve their ambitions.

RBC Investor Services ranks among the world's top 10 global custodians with USD 2.9 trillion (CAD 2.8 trillion) in client assets under administration and is a wholly-owned subsidiary of Royal Bank of Canada, one of the largest and most financially sound banks in the world.

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