Canadian defined pension plans saw gains in the second quarter of 2017 despite the weakening of domestic equities, says RBC Investor & Treasury Services. While Canadian equities saw a loss of 1.9 per cent, total pension plan returns for the second quarter of the year were 1.4 per cent.
The previous quarter saw returns of 2.3 per cent in domestic equities. The decline mirrors that of the TSX Composite Index which saw a loss of 1.6 per cent for Q2 2017, down from gains of 2.4 per cent in the last quarter.
Depressed energy and commodities
"Despite positive economic indicators of a healthy Canadian economy, depressed energy and commodities were amongst the poorest performing sectors to drag on domestic equities," said James Rausch, head of Client Coverage, Canada, RBC Investor & Treasury Services. Oil prices fell over 15 per cent since the beginning of the year and reserves of oil remain above average.
"Nevertheless, Canadian pension fund managers have continued to prudently manage portfolio allocations, remaining underweight in Canadian equities compared to domestic fixed income and global equities and generating yet another positive overall return for the quarter," Rausch said.
Global equities saw a decrease in gains, up 2.3 per cent in the last quarter, compared to 6.2 per cent in Q1. However, stocks continued to respond to positive global economic data, like stable recovery in Europe as well as good quarterly earnings.
However, growth numbers were disappointing and political factors from the US, as well as the belief that recovery in most equities is approaching a natural ceiling, caused the MSCI World Index to drop from 5.8 per cent to 1.3 per cent in Q2 2017, says the report.