Pension assets rose for a fourth successive quarter as global financial markets continued to progress, but the strengthening loonie weighed on gains, according to a survey released Wednesday by RBC Dexia Investor Services.
Within the $340 billion RBC Dexia universe, Canadian pension plans earned 1.9% in the three months ending March 31, bringing one year gains to 22.1%.
Domestic equity remained the top performing asset class for Canadian plans, climbing 3.8% in the quarter and 44.7% over 12 months.
“The loonie has held us back some, but four consecutive quarters of positive returns speaks to the momentum of the recovery — It might be that Q1 2009 marked the end of the financial crisis for Canadian pensions,” said Don McDougall, director of advisory services for RBC Dexia.
“Advances have been fairly broad, but the heavy weightings in bank stocks and their relative performance (up 75%) have accounted for most of the market’s gains since last March. Surprisingly, pensions were generally under-exposed to the Financials sector and still managed to beat the index by 0.7% in the quarter and 2.5% year-over-year.”
Foreign equity fared better but currency losses eclipsed stock market gains. In the quarter, the MSCI World Index rose 4.7% in local currency terms, but pension plans actually lost 0.1% once converted into Canadian dollars. Year-over-year, the loonie appreciated by more than 23% against a basket of world currencies, including 24% against the US dollar, 22% against the Euro and 17% against the Japanese yen.
Despite a late quarter sell-off, Canadian pensions saw their bond holdings rise by 1.7% in the first 3-month of the year, outpacing the DEX Universe index by 0.4%.
“Corporate spreads continued to narrow across all maturities while longer duration bonds were the best performers,” noted McDougall.
Equally owned by RBC and Dexia, the RBC Dexia Investor Services ranks among the world’s top 10 global custodians with US$2.5 trillion in client assets under administration.
IE