Canadian DB pensions emerged ahead from 2020 turbulence

Universe of pension plans show near-double digit returns despite backdrop of radical uncertainty

Canadian DB pensions emerged ahead from 2020 turbulence

Canadian defined-benefit (DB) pensions have shown strong performance and ended 2020 on a positive note, according to a new survey from RBC Investor & Treasury Services.

Based on its All Plan Universe, which tracks the performance and asset allocation of a cross-section of assets under management across Canadian DB pension plans, RBC I&TS found that retirement assets returned 9.2% overall in 2020 and 5.4% in the final quarter of the year.

“It's been a tumultuous time for the markets, but we're seeing positive returns for a third consecutive quarter,” said David Linds, managing director and head of Asset Servicing, Canada. “The successful development of multiple Covid-19 vaccines was a contributing factor, as were the anticipated government support packages and the conclusion of the US elections.”


Median return (%)

Q4 2020


Q3 2020


Q2 2020


Q1 2020


Q4 2019


Q3 2019


Q2 2019


Q1 2019


Q4 2018


Q3 2018


Q2 2018


Q1 2018


Q4 2017


Q3 2017


Q2 2017


Q1 2017


Q4 2016


Q3 2016


Driven by investor optimism, global equity markets showed solid fourth-quarter returns led by stocks in the energy and financials sectors. Value stocks outperformed growth stocks over the quarter, flipping a trend of growth far outperforming value that was reflected in full-year 2020 numbers.

Foreign equities proved to be the best-performing asset class last year, with 12.6% returns overall compared to 13.9% for the MSCI World Index, though Q4 saw gains of 10.1% and 8.7% for foreign stock securities and the benchmark, respectively.

Commodity prices rose as the U.S. dollar weakened, leading to a strengthening of the Canadian dollar that detracted from unhedged plans’ foreign equity returns. The MSCI World Index (CAD) posted a 12.4% return in local currency terms, which translated to an 8.7% return in Canadian dollar terms.

Canadian equities returned 4.1% for the year and 9.4% for Q4, respectively; the corresponding figures for the benchmark TSX Composite were 5.6% and 9%. The technology sector, prominently represented by Shopify, led the market with an 80.7% full-year return; materials and consumer discretionary stocks, meanwhile, trailed significantly at 21.2% and 17.1%, respectively. The poorest performance came from the energy sector, which showed a 26.6% decline.

From a fixed-income perspective, domestic bonds returned 11.1% in 2020 and 1.1% in Q4, comparing favourably to the FTSE TMX Canada Universe Bond Index’s 8.7% and 0.6% during the respective periods. The plunge in longer-term yields proved beneficial for longer-dated bonds, which comfortably outperformed their shorter-dated counterparts over the full year; the FTSE TMX Long Bond Index posted an annual 11.9% return, compared to 5.3% for the FTSE TMS Short Term Bond Index.


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