Data shows one sector boosted Canadian equity holdings
Canadian defined benefit pensions faced tough market conditions in the first quarter of 2025 but those managed by RBC Investor Services were still able to post a positive, if modest, return.
The firm’s analysis of the plans shows a 1.1% return. Canadian equities returned 1.2% which was short of the 1.5% for the S&P/TSX Composite Index, with the materials sector leading the way with an impressive 20.3% rise thanks to gold stocks. Meanwhile, IT was a notable underperformer, losing 7.5%.
For foreign equities, while pension plans’ holdings lost 0.1%, this was well below the 1.7% decline for the MSCI World Index which saw strong divergence of value stocks (up 4.9%) and growth stocks (down 7.7%). There was also weakness for US stocks (down 4.2%) while the EAFE index tracking 21 countries outperformed (up 6.9%). Emerging markets were up 3%.
In fixed income, pension plans posted a 1.8% gain, just below the 2.0% increase in the FTSE Canada Universe Bond Index. With mid-term bonds leading with a 2.7% increase.
"The first quarter reminded us that sector positioning, currency exposure and geopolitical awareness are key to pension performance," said Isabelle Tremblay, Asset Owner Segment Lead at RBC Investor Services. "The appreciation of the euro versus the Canadian dollar amplified foreign equity gains, while political developments, including leadership changes both domestically and abroad, sparked investor recalibration. Pension plans that remained diversified and nimble were better positioned to navigate these challenges."
The resilience of Canadian DB pension plans was recently highlighted in quarterly reports from both Mercer and Aon which pointed to the strong solvency ratios of the plans in their respective universes.
