TORONTO, Jan. 23 /CNW/ - Canadian pension plans suffered the steepest
annual decline on record as global equity markets continued to plunge in the
fourth quarter of 2008, according to a survey just released by RBC Dexia
Investor Services, which maintains the industry's most comprehensive universe
of Canadian pension plans and money managers.
Within the CAD 310 billion RBC Dexia universe, pension assets fell 7.0
per cent in the quarter ending December 2008, pushing 12-month losses to 15.9
per cent. "The last two quarters of 2008 were particularly brutal, but the
pull-back actually started in the summer of 2007," noted Don McDougall,
Director of Advisory Services for RBC Dexia.
"The dismal outcome for 2008 eclipses the previous annual record set in
1974 when pension portfolios shrank by 12.7 per cent," according to McDougall.
"Mind you, pension performance data goes back only to the early 1960's. Before
that, we would have to look to the Great Depression of 1929-32, but figures
are sketchy. Pensions were uncommon in that era and, in any case, equity
exposure would have been quite limited."
Domestic equity was the hardest hit asset class as the S&P TSX Composite
index lost 33.0 per cent over the year. "Pensions fared a little better,
outperforming the index by 1.5 per cent on the strength of their holdings in
Consumer Staples - the only sector to remain unscathed," said McDougall. All
other sectors retreated, shedding between 21.1 and 48.4 per cent from the
start of the year. Financials, the last major group to succumb, tumbled 29.6
per cent in the final quarter, as the S&P TSX dropped 22.7 per cent.
In Canadian dollar terms, global equities lost 27.8 per cent for the
year, lagging the MSCI World Index by 1.9 per cent. "Most pension funds
remained under-exposed to the US market," reported McDougall.
With many global stock markets reporting record declines in 2008, the
MSCI World index sank 38.7 per cent in local currency terms. "However,
fortunately for unhedged Canadian investors, the weaker loonie went a long way
to soften the blow," explained McDougall. In the fourth quarter alone, the
Canadian dollar depreciated by 12.9 per cent against a basket of world
Thanks to a late fourth quarter rally, Canadian bonds earned 4.5 per cent
for the year - although this fell short of the 6.4 per cent gain in the DEX
Universe broad market benchmark. McDougall observed, "Shorter duration bonds
prevailed. Credit quality was king across all maturity categories. Long-term
federal bonds outdid long-term corporate debt by 24 per cent for the year."
About RBC Dexia Investor Services
RBC Dexia Investor Services offers a complete range of investor services
to institutions worldwide. Our unique offshore and onshore solutions, combined
with the expertise of our 5,200 professionals in 16 markets, help clients grow
their business and sustain enhanced performance through efficiency
improvements and robust risk management processes. Equally-owned by RBC and
Dexia, the company ranks among the world's top 10 global custodians with USD
2.8 trillion in client assets under administration. rbcdexia.com
For further information:
For further information: Warren Weeks, RBC Dexia Investor Services,
Toronto, (416) 955-7048