Canadian pension returns up slightly

Canadian defined benefit pension plans were up only slightly in Q1 2018. Returns were 0.2%, down from Q4 2017 returns of 4.4%, finds RBC Investor & Treasury Services All Plan Universe. Pension returns were 2.9% in Q1 2017.

Canadian equities were greatly impacted during the quarter, posting a 3.9% loss, compared to gains of 4.2% and 2.3% in Q4 2017 and Q1 2017, respectively. The TSX Composite Index followed a similar trend, posting a 4.5% loss during the quarter compared to a 4.5% gain in Q4 2017 and 2.4% a year earlier.

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Global equities retreated: they returned 2% in Q1 2018, a decrease from 6.1% a quarter earlier. The MSCI World Index returned 1.6% in Q1 2018, down from 5.7% in Q4 2017 and 5.8% a year earlier.

“The first quarter of 2018 was full of instability and volatility, with Canadian equities taking the biggest hit,” says Ryan Silva, director, head of pension and insurance Segments, global client coverage at RBC Investor & Treasury Services. He cites uncertainty around NAFTA trade negotiations and potential interest rate hikes as factors weighing down the TSX Composite Index and other indexes.

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He suggests that asset managers “maintain a diversified portfolio to actively manage their risk exposure.”

The same global issues and tensions impacted Canadian fixed-income returns. Those assets posted a small return of 0.1% in Q1 2018, down from 2.2% in Q4 2017. Meanwhile, the FTSE TMX Universe Canadian Bond Index returned 0.1% in Q1 2018, a dip from 2% in Q4 2017.

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The Canadian dollar was the worst-performing major currency during Q1 2018. In the quarter, the U.S. dollar appreciated versus the Canadian dollar by 2.9%—also due to the uncertainty around trade talks and how those are affecting the Canadian economy and monetary policy.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.