TORONTO, July 30, 2013 /CNW/ - Pension assets remained unchanged during
the second quarter of 2013, as a spike in interest rates in June
negated advances in April and May, according to the latest survey from
RBC Investor & Treasury Services.
According to the $460 billion RBC Investor & Treasury Services All Plan
universe - the industry's most comprehensive universe of Canadian
pension plans - defined benefit (DB) pensions returned zero per cent
for the quarter ending June 30, 2013, keeping year-to-date results at
4.5 per cent. "Market volatility returned in June following the Fed's
statements regarding its commitment to quantitative easing," said Scott
MacDonald, Head, Pension Segment Development for RBC Investor &
Treasury Services. "While all DB plans benefit from rising long term
bond yields as pension liabilities are reduced, those with risk
mitigating liability driven investment strategies were the hardest hit
during the quarter."
Bonds had their largest three month decline since 1994, losing 2.5 per
cent in the quarter and 1.7 per cent over six months. "Weakness was
across the market, but longer duration bonds were the most affected, as
the DEX Long Term Index declined 4.6 per cent in the quarter and DEX
Real Return Bonds are down 11 per cent year-to-date," noted MacDonald.
Canadian equities also lost ground within pension plans, declining 1.2
per cent compared to the S&P/TSX Composite, which was down 4.1 per cent
in the quarter. "The decline in the materials sector and mining stocks
in particular continued to be the key factor affecting performance this
quarter. Looking at the year-to-date figures, most pensions stayed in
positive territory despite the market's loss by remaining underexposed
to the sector and have subsequently outperformed the index by 4.2 per
cent," said MacDonald.
Foreign stocks provided the needed support this quarter, gaining 4.7 per
cent, mostly due to continued positive performance in the U.S. equities
market. This compares to the MSCI World Index which advanced 4.5 per
cent in the quarter. "Unhedged pension plans benefitted from the
Canadian dollar's weakness against most major currencies, with FX
returns accounting for over half of the gains," said MacDonald.
"Foreign Equities continue to lead year-to-date - up 15.4 per cent in
Canadian dollar terms."
About RBC Investor & Treasury Services
RBC Investor & Treasury Services, part of Royal Bank of Canada (RY on
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trillion in client assets under administration.
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