TORONTO, January 22, 2014 - Canadian pension plans posted solid gains in 2013 as global equity markets continued to surge during the fourth quarter, according to the latest survey from RBC Investor & Treasury Services.
Within the $460 billion RBC Investor & Treasury Services All Plan universe - the industry's most comprehensive universe of Canadian pension plans - defined benefit (DB) pension assets returned 6.1 per cent during the three months ending December 31, 2013, bringing annual gains to 14.2 per cent.
"Pensions gained a lot of traction in 2013," said Scott MacDonald, Managing Director, Pensions for RBC Investor & Treasury Services. "Strong equity gains and a weaker Canadian dollar led to an increase in assets, while higher long term bond yields reduced most plan liabilities, which will please sponsors."
Foreign equity was the top performing asset class, rising 11.5 per cent in the fourth quarter while bringing full-year results up 35.8 per cent - ahead of the MSCI World Index by 0.6 per cent. "Currency gains accounted for approximately 20 per cent of the returns, but strength was spread across the majority of developed markets. The U.S. contributed the most, with the S&P 500, up 41.3 per cent, having its best calendar year result in Canadian dollar terms since 1958," added MacDonald.
Domestic stocks also helped, advancing 19.4 per cent for the year, but were held back by the materials sector which continued to show weakness in the fourth quarter and subsequently shed close to 30 per cent of its value since the beginning of 2013. "2013 was a really good year for active Canadian equity management," said MacDonald. "Most pensions maintained an underexposure to the sector and consequently outperformed the S&P/TSX Composite Index by 6.4 per cent during the year."
Canadian pensions however had their largest annual fixed income decline since 1994, losing 1.3 per cent over the last 12 months. "The weakness spread across the market, but inflation-sensitive longer-duration bonds were the most affected as the DEX Real Return Bond Index declined 13.1 per cent while DEX Long Term Bonds were down 6.2 per cent," noted MacDonald. "In this environment, the risk mitigating liability driven strategies were the hardest hit on the asset side."
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RBC Investor & Treasury Services (RBC I&TS) is a specialist provider of asset servicing, custody, payments and treasury services for financial and other institutional investors worldwide. We serve clients from 18 locations across North America, Europe and the Asia Pacific region. We deliver custodial, advisory, financing and other services to safeguard clients' assets, maximize liquidity and manage risk in multiple jurisdictions. RBC I&TS is ranked among the world's top 10 global custodians, with $ 3.2 trillion in client assets under administration (as at December 05, 2013).
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