Pension assets increased for a fourth successive quarter as global markets maintained their winning streak during the three months ending June 30, according to the latest survey from RBC Investor & Treasury Services.
Within the $520 billion RBC Investor & Treasury Services All Plans universe – the industry’s most comprehensive universe of Canadian pension plans – defined benefit (DB) pension plans returned 3.0 per cent during the second quarter 2014, bringing year-to-date results to 7.8 per cent.
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"While assets continue to gain momentum, we can also infer that liabilities have also increased as longer-term bond yields have come down," said Scott MacDonald, managing director, Pensions for RBC Investor & Treasury Services.
Canadian equity remained the top performing asset class as the S&P/TSX Composite Index gained 6.4 per cent in the quarter and 12.9 per cent year-to-date. "The two largest sectors (Financials and Energy) accounted for the bulk of the increase with Energy leading the way as concerns over Iraq helped boost oil stocks," said MacDonald. "Pensions kept pace with the index for the quarter but still lag by 0.2 per cent year-to-date."
"Bonds fared better than most expected as a result of declining interest rates, gaining 2.1 per cent in the quarter and 5.5 per cent over six months. Strength continued to come from the longer end of the curve, pushing year-to-date totals to 9.1 per cent for FTSE/TMX Long Term bonds and 10.7 per cent for FTSE/TMX Real Return Bonds," said MacDonald.
Foreign stock markets also moved higher for the eighth consecutive quarter as the MSCI World Index gained 4.4 per cent in local currency terms, but FX losses resulted in advances of only 1.0 per cent for Canadian pension plans. "Currency volatility has been a key factor affecting performance this year as the Canadian dollar rebounded back to year-end levels against the US dollar and the Euro," added MacDonald. Year-to-date results show foreign assets up 6.4 per cent, which is in line with the World benchmark.
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