Healthy fourth quarter performance bounced Canadian pension fund returns back into double-digits for a second consecutive year, according to a quarterly survey from BENCHMARK, an arm of RBC Global Services.

Within the $340 billion BENCHMARK universe, balanced funds earned 5.3% in the quarter ending December 2004, boosting year-end performance to 10.1%.

“This year, as last year, markets rallied in the final quarter,” observed Don McDougall, Director, BENCHMARK, RBC Global Services. “Half the annual gains were concentrated in those final three months — a strong finish, however, 2004 did not quite match the 13.5% annual return posted in 2003.”

Canadian equities — the top-performing asset class for the last seven quarters — returned 15.7% in 2004. Active managers outperformed the market by 1.2%, capturing superior returns in materials and industrials, while maintaining exposure to the energy and financial sectors.

Global stock markets also gathered momentum, pushing the annual MSCI World index to 11.3% in local currency. For Canadian-based investors, continued appreciation of the loonie — particularly against the U.S. dollar — slashed foreign equity returns to 6.5%, once currency was taken into account.

“2004 was not just about equities. Low interest rates buoyed domestic bonds,” added McDougall. Canadian fixed income managers averaged 7.2% over the year, keeping pace with the Scotia Capital Universe Bond Index.