Resurging global equity markets continued to lift pension assets in the fourth quarter, marking an end to a remarkable year which saw plan sponsors gain back most of their 2008 losses, according to a survey released Thursday by RBC Dexia Investor Services.

Within the $340 billion RBC Dexia universe, Canadian pension plans earned 1.9% in the last three months ending December 31, 2009, bringing year-end results to 16.2%.

“The speed of the rally, particularly in the second and third quarters caught pensions by surprise, as many remained under-exposed to equities,” says Don McDougall, director of advisory services for RBC Dexia.

“Then again, after last year’s brutal 15.9% drop, it is reassuring to see pension plans claw back to pre- crisis state.”

Canadian equities were the top performing asset class as the S&P TSX Composite index posted its best calendar year result since 1979, soaring 35.1%.

“All sectors advanced, with most gaining double digits — but the top heavy weightings in financials, energy and the materials sectors accounted for more than 85% of the market’s rise this year,” notes McDougall.

“Amazingly, pensions remained under-weighted to all three major groups throughout the year and still managed to outpace the index by 0.3% on the strength of superior security selection.”

Foreign stock markets also staged a solid comeback, lifting the annual MSCI World index to 25.7% in local currency terms. McDougall adds, “Unfortunately for unhedged Canadian-based pensions, a stronger loonie against most world currencies slashed the foreign equity returns to 12.6%.”

In domestic bonds, Canadian pensions advanced 7.9% in the year, surpassing the DEX Universe index by an impressive 2.5%. In a stark reversal from last year, corporate spreads narrowed throughout 2009 across all maturity categories.

“Long-term corporate debt outdid long-term federal credits by a staggering 29.7% for the year,” says McDougall.

IE