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Canadian pension returns post slight gain in Q3 2018: RBC Investor & Treasury Services

Q3 2018 total returns gain 0.1 per cent; Canadian equities lose -0.3 per cent and fixed income holdings lose -1.5 per cent in Q3 2018

TORONTO, November 6, 2018 - Canadian defined benefit pension plans posted a slim uptick in Q3 2018, returning 0.1 per cent, down from Q2 returns of 2.2 per cent, according to the RBC Investor & Treasury Services All Plan Universe.

ADDITIONAL RESULTS

  • Canadian equities posted a negative Q3 2018 return of -0.3 per cent, reversing the Q2 2018 returns of 6.8 per cent.
  • The TSX Composite Index posted a similar decline, primarily due to weakness in energy and materials stocks, returning -0.6 per cent in Q3 2018 compared to 6.8 per cent in Q2 2018. Healthcare was the sole bright spot in Q3, due to robust performing cannabis stocks. Interest rate hikes and ongoing trade tensions also negatively impacted return levels.
  • Global equity returns were subdued due to trade war fears and central bank rate hikes, but managed to post another quarter of positive returns: 2.3 per cent in Q3 2018, compared to 2.6 per cent in Q2 2018.
  • MSCI World Index gained 3.2 per cent this quarter, versus 3.8 per cent in Q2 2018 while emerging markets dropped another 2.8 per cent.
  • Rising long-term yield levels helped pull back Canadian Fixed Income returns in Q3 2018 compared to the previous quarter. Q3 2018 returns were -1.5 per cent compared to 0.6 in Q2 2018.
  • The FTSE TMX Universe Canadian Bond Index also retreated in Q3 2018, returning –1.0 per cent, compared to 0.5 per cent in Q2 2018. The FTSE TMX Canada Long Term Bond Index lost 2.4 per cent, while the FTSE TMX Canada Short term bond index was flat at 0.0 per cent.

“Despite a lackluster quarter for Canadian equities, Canadian pension returns remain in positive territory for 2018 at 2.2 per cent for the year. Interest rate hikes and free trade negotiations weighed on Canadian indices and impacted returns this quarter. However, the newly negotiated United States Mexico Canada Agreement (USMCA) should provide some relief in Q4 2018. Conversely, as we head into the final quarter of the year, ongoing geo-political concerns, interest rate anxieties globally, and an economic slowdown in China shouldn’t be ignored. Asset managers will need to maintain their vigilance to the ongoing volatility and retain a diversified portfolio to actively manage their risk exposure.”

- Ryan Silva, Director, Head of Pension and Insurance Segments, Global Client Coverage RBC Investor & Treasury Services

HISTORIC PERFORMANCE

Period

Return (%)

Period

Return (%)

Q3 2018

0.1

Q4 2016

0.5

Q2 2018

2.2

Q3 2016

4.2

Q1 2018

0.2

Q2 2016

2.9

Q4 2017

4.4

Q1 2016

0.0

Q3 2017

0.4

Q4 2015

3.1

Q2 2017

1.4

Q3 2015

-2.0

Q1 2017

2.9

Q2 2015

-1.6

About the RBC Investor & Treasury Services All Plan Universe
For the past 30 years, RBC Investor & Treasury Services (RBC I&TS) has managed one of the industry’s largest and most comprehensive universes of Canadian pension plans. The “All Plan Universe” currently tracks the performance and asset allocation of a cross-section of assets under management across Canadian defined benefit (DB) pension plans, and is a widely-recognized performance benchmark indicator. The RBC Investor & Treasury Services “All Plan Universe” is produced by RBC I&TS’ Risk & Investment Analytics (R&IA) service. R&IA work in partnership with best-in-class technology to deliver independent and cost effective solutions designed to help institutional investor clients monitor investment decisions, optimize performance, reduce costs, mitigate risk and increase governance capability.

About RBC Investor & Treasury Services
RBC Investor & Treasury Services (RBC I&TS) is a specialist provider of asset services, a leader in Canadian cash management and transaction banking services, and a provider of treasury services to institutional clients worldwide, with over 4,000 employees in 17 countries across North America, Europe, Asia and Australia. We deliver services which safeguard client assets, underpinned by client-centric digital solutions which continue to be enhanced and evolved in line with our clients’ changing needs. Trusted with CAD 4.2 trillion in client assets under administration as at August 22, 2018, RBC I&TS has been rated by our clients as the #1 global custodian for eight consecutive years and is a financially strong partner with among the highest credit ratings globally.

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For more information, please contact:
Briana D’Archi, 416 955 5658, briana.darchi@rbc.com

RBC Investor & Treasury Services is a global brand name and is part of Royal Bank of Canada. RBC Investor & Treasury Services is a specialist provider of asset servicing, custody, payments and treasury services for financial and other institutional investors worldwide. RBC Investor Services operates through the following primary operating companies: Royal Bank of Canada, RBC Investor Services Trust and RBC Investor Services Bank S.A., and their branches and affiliates. These materials are provided by RBC Investor & Treasury Services (RBC I&TS) for general information purposes only. RBC I&TS makes no representation or warranties and accepts no responsibility or liability of any kind for their accuracy, reliability or completeness or for any action taken, or results obtained, from the use of the materials. Readers should be aware that the content of these materials should not be regarded as legal, accounting, investment, financial, or other professional advice, nor is it intended for such use. ® / Trademarks of Royal Bank of Canada. Used under licence.

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