Canadian equities remained the top-performing asset class in 2005 and helped lift Canadian pension plans to another strong showing for the year, according to a quarterly survey just released by BENCHMARK, the investment analytics arm of RBC Dexia Investor Services.

Within the $340 billion BENCHMARK universe, balanced pension funds earned 2.1% in the quarter ending December 2005, bringing year-end performance to a solid 11.7% gain.

“That’s three consecutive years, since the tech bubble in 2002, that longer-term assets have performed extremely well,” observed Don McDougall, Director, BENCHMARK, RBC Dexia Investor Services.

Canadian equities led the way for a third consecutive year, on the strength of a whopping 63.4% return in energy stocks, which accounted for nearly half of the market’s 24.1% gain in 2005. Surprisingly, active managers kept pace with the market despite remaining under-exposed to the high-flying energy sector over the course of the year.

Global stock markets also continued to do well, pushing the annual MSCI World index to 15.8% in local currency. For Canadian-based investors, however, continued appreciation of the Canadian dollar slashed foreign equity returns to a meagre 6% for the year, once currency was taken into account.

“The loonie has been a major factor over the past three years, first against the U.S. dollar in 2003 and 2004 and this year against the yen and euro,” McDougall said.

In Canadian fixed income, managers averaged 6.5% over the year, matching the Scotia Capital Universe Bond Index, despite significant opportunities in real return bonds and longer duration bonds to add value, according to McDougall.