Canadian DB pension funds saw strong gains in 2017

RBC reports ninth year of positive returns

Canadian DB pension funds saw strong gains in 2017
Steve Randall
Canadian defined-benefit pension funds have achieved a nine-year run of positive returns following a strong performance in 2017.

A report from RBC Investor & Treasury Services reveals a 9.7% annual return as continued low interest rates, growth in the global economy, recovering emerging markets, and improved labour markets all helped boost equity returns.

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In the fourth quarter alone, Canada’s DB funds gained 4.4% with equity returns of 6.1%.

"2017 was a strong year for Canadian pension plans, with year-over-year returns, despite a backdrop of ongoing global economic and political volatility," said James Rausch, Head of Client Coverage, Canada, RBC Investor & Treasury Services.

"The Bank of Canada rate hikes, the first in seven years, reverberated through the bond market, while the energy and commodity sectors continued to fluctuate and impact Canadian markets. Meanwhile, global equities continued to provide strong and stable returns,” he added.

RBC’s report highlights that energy stocks weighed on the overall year-over-year returns for TSX equities. Canadian bond yields rose across most of the curve while the Bank of Canada's interest rate hikes in July and September led to a flatter yield curve when compared to the start of the year.

“Fund managers will continue to pay close attention to these strong global returns and geopolitical developments to maintain a diversified portfolio across asset sectors and classes in the year ahead," concluded Rausch.
Period Return (%) Period Return (%)
Q4 2017 4.4 Q4 2015 3.1
Q3 2017 0.4 Q3 2015 -2.0
Q2 2017 1.4 Q2 2015 -1.6
Q1 2017 2.9 Q1 2015 6.6
Q4 2016 0.5 Q4 2014 2.7
Q3 2016 4.2 Q3 2014 1.1
Q2 2016 2.9 Q2 2014 3.0
Q1 2016 0.0 Q1 2014 4.8