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 $340 billion RBC Dexia universe, pension funds earned 1.8% 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,” noted Don McDougall, director of advisory services, RBC Dexia, in a news release.

“Since hitting their low-point in March of 2003, pensions have benefited from impressive equity numbers and consequently, have performed extremely well,” added McDougall. “The median Canadian plan has realized a healthy 14.1% annualized return over the past four years.” In the past 12 months, performance averaged 10.8%.

Canadian equities were the dominant asset class over the four-year period, generating a whopping 23.7% annualized gain and outpacing the S&P/TSX composite by index 1.3%. Domestic equities continued to fare well in the first quarter of 2007, climbing 3.4% and lifting their one-year performance to 14.1%.

Foreign stocks also did their part, pushing the four-year MSCI World Index to 14.2% in Canadian dollar terms. Moreover, by limiting exposure to the underperforming U.S. market, Canadian pensions outpaced the industry benchmark by more than a full percentage point, gaining 15.4% for the period. Over the past 12 months, performance was a solid 14.7%.

Domestic bonds continued to post lacklustre results in Q1. The median pension fund earned 0.9% 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% return on fixed income.