Toronto, January 29, 2013 — Global equity and real estate returns boosted Canadian pension plans despite fourth quarter volatility, according to the latest survey from RBC Investor Services, part of Royal Bank of Canada's (RY on TSX and NYSE) Investor & Treasury Services segment.
Within the $410 billion RBC Investor & Treasury Services All Plan universe - the industry's most comprehensive universe of Canadian pension plans - Canadian defined benefit (DB) pensions gained 2.5 per cent in the quarter ending December 31, 2012, compared to 3.2 per cent in the third quarter. The median 2012 return for Canadian DB plans was 9.4 per cent.
"With overall 2012 returns approaching double digits, Canadian defined benefit pension plans were able to breathe a little easier even with only modest returns in the fourth quarter," said Scott MacDonald, Head, Pensions, Insurance, and Sovereign Wealth Strategy for RBC Investor Services. "Continued stimulus by central banks in Europe, Japan and the U.S. offered hope for the global economy, while here in Canada lower global demand for commodities dampened Canadian equity returns. Despite this weakness, other contributing sectors finished the year strong, helping Canadian equity performance for the quarter to remain positive."
Canadian equities returned 1.7 per cent in the fourth quarter, bringing full year S&P/TSX performance up to 7.2 per cent. Eight out of 10 sectors in the S&P/TSX Composite had positive gains in the fourth quarter, with consumer staples and information technology up 9.2 per cent and 7.3 per cent respectively. Financials continued to be a primary Canadian equity driver as the sector rose 6.3 per cent in the quarter, ending the year up 17.6 per cent.
Canadian pensions' Canadian equity holdings returned 3.1 per cent for the quarter, outperforming the S&P/TSX Composite by 1.4 per cent as they were underweight in materials and slightly overweight in consumer staples and information technology.
Despite concerns over the European crisis, the U.S. election and weakening corporate earnings growth, Canadian dollar returns for the MSCI World was 3.7% for the quarter and 13.3 per cent on the year. Canadian Pensions outperformed the benchmark MSCI World index by 0.8 per cent in the fourth quarter and 1.4 per cent for 2012.
The real estate asset class also gave Canadian pensions a lift, delivering double digit returns in 2012.
Canadian DB plans matched the benchmark DEX Universe Bond Index, returning 0.3 per cent for the fourth quarter but were able to outperform the benchmark on the year by 0.9 per cent.
Added MacDonald: "Within the DEX Universe index, the corporate segment continued to outperform the government segment as managers were confident enough to take on additional risk for the potential yield."
About RBC Investor & Treasury Services
RBC Investor & Treasury Services, part of Royal Bank of Canada (RY on TSX and NYSE), is a specialist provider of custody, payments and treasury services for financial and other institutional investors worldwide. The Investor & Treasury Services segment is comprised of three businesses: Global Financial Institutions, Investor Services and Treasury Services. Active in 15 markets globally, RBC Investor & Treasury Services provides custodial, advisory, financing and other services to safeguard clients' assets, maximize liquidity and manage risk in multiple jurisdictions. RBC Investor & Treasury Services is ranked among the world's top 10 global custodians, with USD 2.9 trillion (CAD 2.8 trillion) in client assets under administration.
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