Solid equity market returns offset weakness
in bonds
TORONTO, July 29, 2021 /CNW/ - According to the RBC
Investor & Treasury Services All Plan Universe, Canadian DB
pension plans returned 4.4% in Q2 2021, up 3.5% over the first half
of the year. Equity markets continued to march upwards, bolstered
by the accelerated rollout of Covid-19 vaccines and reopening of
the global economy.
"Canadian pension plans have generated an impressive 22.6%
cumulative return on their assets since the violent sell-off in Q1
2020. This reflects the market's optimism over the
sooner-than-expected reopening of the global economy due to the
increased availability and uptake of vaccines in the developed
world," said David Linds, Managing Director and Head of Asset
Servicing, Canada, RBC Investor
& Treasury Services.
"Experts are now pointing to the growing threat of a Covid
resurgence as the Delta variant spreads," continued Linds.
"Managing and preparing for this possibility and remaining vigilant
to other risks, such as high valuations in equity markets, mounting
structural versus transitory inflationary pressures and ongoing
geopolitical tensions will remain a priority of Canadian DB plans
for the remainder of 2021."
Benefiting from their sizable exposure to cyclical stocks,
Canadian equities outpaced their global counterparts, returning
7.9% to Canadian DB plan holders in Q2 2021, and 17.3% on a
year-to-date basis. The S&P/TSX Composite Index benchmark
returned 8.5% over the quarter, driven by a solid performance in
the information technology (+23.0%), energy (+13.9%) and financials
(+8.3%) sectors. This represented a notable turnaround from 15
months prior, when Canadian equities posted a loss of -20.9% in Q1
2020 and significantly underperformed the global market.
Meanwhile, Canadian DB plans' foreign equities returned 5.2% in
Q2 2021, with growth stocks outperforming value stocks, a reversal
from what took place over the previous two quarters. Foreign
equities returned 9.3% over the first half of the year; local
currency gains for unhedged plans were trimmed by the strength in
the Canadian dollar, which was the top advanced-economy currency
through the first five months of the year. The MSCI World Index
returned 6.2% over the quarter, ahead of the MSCI Emerging Markets
Index, which returned 3.5%.
Fixed income returns were positive for Canadian DB plans,
returning 3.0% in Q2, but were down -5.0% year-to-date. Dovish
comments from central banks emphasizing the transitory nature of
recent high inflation readings reassured bond investors, and
long-term yields moved lower. The FTSE Canada Universe Bond Index
posted a quarterly return of 1.7%, with longer-term bonds (FTSE
Canada Long index +3.7%) outperforming their short-term
counterparts (FTSE Canada Short Term index +0.1%).
Historic performance
Period
|
Median
return (%)
|
Period
|
Median
return (%)
|
Q2 2021
|
4.4
|
Q1 2019
|
7.2
|
Q1 2021
|
-0.2
|
Q4 2018
|
-3.5
|
Q4 2020
|
5.4
|
Q3 2018
|
0.1
|
Q3 2020
|
3.0
|
Q2 2018
|
2.2
|
Q2 2020
|
9.6
|
Q1 2018
|
0.2
|
Q1 2020
|
-7.1
|
Q4 2017
|
4.4
|
Q4 2019
|
2.0
|
Q3 2017
|
0.4
|
Q3 2019
|
1.7
|
Q2 2017
|
1.4
|
Q2 2019
|
2.7
|
Q1 2017
|
2.9
|
About the RBC Investor & Treasury Services All Plan
Universe
RBC Investor & Treasury Services has
managed one of the industry's largest and most comprehensive
universes of Canadian pension plans for more than 30 years. The All
Plan Universe, a widely recognized performance benchmark indicator,
tracks the performance and asset allocation of a cross-section of
assets across Canadian defined benefit pension plans. The All Plan
Universe is produced by RBC Investor & Treasury Services' Risk
& Investment Analytics service, which delivers independent and
cost effective solutions that help institutional investors monitor
investment decisions, optimize performance, reduce costs, mitigate
risk and enhance governance.
About RBC
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a purpose-driven, principles-led approach to delivering leading
performance. Our success comes from the 86,000+ employees who
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About RBC Investor & Treasury Services
RBC
Investor & Treasury Services (RBC I&TS) is a
financially strong partner that provides asset and payment services
to corporate investors and financial institutions globally. Trusted
with CAD 4.5 trillion in assets under
administration, clients are at the heart of our service offering.
With offices in 16 countries, our focus is on safeguarding client
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meaningful insights, simplify our clients' operations and support
their growth.
SOURCE RBC Investor & Treasury Services