Canadian pension plans ended the year barely in positive territory thanks to an impromptu October market rally which helped lift retirement assets by 4.2% in the fourth quarter, according to a survey just released by RBC Dexia Investor Services.
Within the $340 billion RBC Dexia universe, Canadian pensions earned just 0.5% for the year ended December 31, 2011.
“It’s been a tumultuous year for global markets,” says Don McDougall, Director of Advisory Services for RBC Dexia. “We had a natural disaster in Japan, geopolitical tensions in the Middle East, a stubborn U.S. recovery with its ensuing political backlash, sputtering Chinese growth and the ever lingering European debt crisis — most pensions will be pleased it’s over.”
Canadian equity was the hardest hit asset class during the year as the S&P TSX Composite index dropped 8.7%. “Weakness in the three largest sectors, materials (down 21%), energy (down 10%) and financials (down 3%) accounted for the bulk of the market’s decline,” observes McDougall. “Pensions trailed the S&P TSX Composite by 0.9% for the year despite outperforming the benchmark by 0.6% in the December quarter.”
Foreign equities also moved backwards during the year, losing 4.2% while under-performing the MSCI World index by 1.0%. “Weakness was very broad across all markets, while the U.S. (up 2% in local currency) was one of the select few to remain positive” notes McDougall. “Canadian plans also benefitted from a weaker Canadian dollar against most major currencies with the exception of the Euro.”
Bonds provided the needed support, advancing 9.8% over the last twelve months on the heels of a late-year rally. “Fixed income strength continued to come from declining longer term bond yields as the DEX Long Term bond index (up 18.1%) had its best calendar year result since 1997,” said McDougall.