Aggressive central bank interventions and
uncertain economic outlook cited as headwinds
TORONTO, Oct. 31,
2022 /CNW/ - Canadian DB pensions in the RBC Investor
& Treasury Services All Plan Universe gained 0.5% in Q3,
bringing the year-to-date return to -13.7% for the period ending
September 30, 2022.
Niki Zaphiratos, Managing Director, Asset Owners, RBC Investor
& Treasury Services, said, "Pensions experienced a temporary
reprieve in July as the global markets rallied sharply. This rather
short-lived change in market sentiment was based mostly on the
assumption that the central banks' actions would help control
inflationary pressures. We then saw losses over the rest of the
quarter, primarily due to concerns that additional aggressive
measures would be taken by the central banks."
"As we head toward year-end," Zaphiratos continued, "we are
facing various headwinds: the emergence of new COVID-19 variants,
the fear of upcoming central bank interest rate hikes and
quantitative tightening to combat high and persistent global
inflation, and the implications of the Russo-Ukrainian War and
US-China tensions. Economic uncertainty remains high and pension
fund managers are preparing for ongoing market volatility as the
weight of these pressures continues to be felt."
DB pension plans' foreign equities returned -1.1%, slightly
behind the MSCI World Index, which returned -0.1%. Growth stocks
significantly outperformed value stocks in July, but ended the
quarter only slightly ahead (MSCI World Growth CAD +1.1% versus
MSCI World Value CAD -1.2%). Within the MSCI World benchmark,
weakness in the Communications (-7.3%) and Real Estate (-6.0%)
sectors were offset by strength in the Consumer Discretionary
(+6.8%) and Energy (+5.0%) sectors. Pension plans with unhedged US
dollar exposure benefitted from the rapid appreciation of the US
dollar versus the other major trading currencies, driven by
investors flocking to that safe haven option.
Canadian equities held by Canadian DB plans returned -1.2% over
the quarter, slightly ahead of the TSX composite's -1.4% return
over that period. In the benchmark, weakness was noted in the
Communication Services (-7.5%) and Energy (-5.3%) sectors, whereas
the Industrials (+4.2%) and Consumer Discretionary (+4.2%) sectors
outperformed. On a year-to-date basis, Canadian equities led their
global counterparts owing to their large exposure to the Energy
sector, and were the top performing asset class (-8.8%) in the peer
universe.
Fixed income securities held by Canadian DB plans returned 1.1%
for the quarter, but were down 17.5% on a year-to-date basis. The
FTSE Canada Universe bond index meanwhile returned 0.5% in Q3,
compared to -5.7% in Q2. As central banks around the world
continued to aggressively raise short-term interest rates to stem
inflation, long-term bonds (FTSE Canada Long Term Bond Index +1.5%)
outperformed their short-term counterparts (FTSE Canada Short Term
Bond Index -0.3%) for the quarter. However, the reverse was true on
a year-to-date basis, with short-term bonds returning -4.7% and
long-term bonds returning -21.0%.
Historic performance
Period
|
Median return (%)
|
Period
|
Median return (%)
|
Q3 2022
|
0.5
|
Q2 2020
|
9.6
|
Q2 2022
|
-8.6
|
Q1 2020
|
-7.1
|
Q1 2022
|
-5.5
|
Q4 2019
|
2.0
|
Q4 2021
|
4.5
|
Q3 2019
|
1.7
|
Q3 2021
|
0.6
|
Q2 2019
|
2.7
|
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
|
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.
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Services
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provides asset and payment services to corporate investors and
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SOURCE RBC Investor & Treasury Services