DB plans improve in Q2, while Caisse posts 3.3% return over six months

Canadian defined benefit pension plans returned 2.2% in the second quarter of 2018, an increase from the 0.2% reported in Q1, RBC Investor & Treasury Services said Thursday.

After losses of 3.9% in the first quarter, Canadian equities were driven by a strong energy sector to a 6.8% return in Q2, RBC said, while global equities improved from a 2% return in Q1 to 2.6% in the more recent quarter.

Fixed income markets were impacted by trade tensions and remained almost unchanged, with a 0.6% Q2 return compared to 0.1% in the first quarter.

Caisse reports gains in ‘complex’ six months

Quebec’s Caisse de depot is reporting a return of 3.3% on clients’ funds for the first six months of 2018, compared with 3.5% for its benchmark portfolio.

Over five years, the weighted average annual return was 9.9%, which represented net investment results of $111.3 billion.

That brought the pension fund manager’s net assets to $308.3 billion.

The Caisse earned a 9.3% return in 2017.

“The market environment became more complex in the first half of the year,” Caisse president and CEO Michael Sabia said in a statement Thursday.

“Tightening liquidity conditions and protectionist measures by the U.S. have increased volatility since January. The long-running global bull market is slowing down. As the U.S. Federal Reserve continues to normalize its monetary policy and rates gradually climb, we are seeing a change of tone in the markets.”

In the first half of 2018, the Caisse pursued its strategy of diversifying its sources of returns by investing in credit and less-liquid assets, concentrating on the new economy as well as on renewable energy and green technology.

The six-month period also saw the Caisse and the Fonds de solidarite FTQ sign an agreement with Boralex to invest up to $300 million by way of an unsecured subordinated loan in the renewable energy company.

The Caisse has invested $170 million under the agreement, which follows a stake of nearly 20% taken in the company in 2017.

The $308.3 billion in clients’ net assets was $9.8 billion higher than the $298.5 billion as of Dec. 31, 2017. The growth was attributable to net investment results of $9.4 billion and net deposits of $400 million.

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