Bolstered by yet another quarter of healthy equity returns, Canadian pension funds maintained their positive momentum during the first quarter, according to a report by RBC Dexia Investor Services.
Within the CAD 340 billion RBC Dexia universe, pension funds earned 1.8 per cent in the quarter ended March 31, 2007. “On the heels of two very strong back-to-back quarters, this is a fairly respectable start to the new year,” notes Don McDougall, director of advisory services, RBC Dexia. “Since hitting their low-point in March of 2003, pensions have benefitted from impressive equity numbers and consequently, have performed extremely well. The median Canadian plan has realised a healthy 14.1 per cent annualised return over the past four years,” he adds. In the past 12 months, performance averaged 10.8 per cent.
Canadian equities were the dominant asset class over the four-year period, generating a whopping 23.7 per cent annualised gain and outpacing the S&P TSX Composite by 1.3 per cent. Domestic equities continued to fare well in the first quarter of 2007, climbing 3.4 per cent and lifting their one-year performance to 14.1 per cent.
Foreign stocks also did their part, pushing the four-year MSCI World Index to 14.2 per cent in Canadian dollar terms. Moreover, by limiting exposure to the underperforming US market, Canadian pensions outpaced the industry benchmark by more than a full percentage point, gaining 15.4 per cent for the period. Over the past 12 months, performance was a solid 14.7 per cent.
Domestic bonds continued to post lacklustre results in Q1. The median pension fund earned 0.9 per cent for the quarter, matching the Scotia Capital Universe Bond Index. Over the past four years, however, Canadian plans have averaged a more impressive 6.7 per cent return on fixed income.