RBC I&TS: Canadian defined benefit pension plans report record quarter
29 July 2020 Toronto
Image: Oko Laa/Shutterstock
Canadian benefit pension plans saw a median return of 9.6 percent during Q2 2020, according to the RBC Investor & Treasury Services (RBC I&TS) All Plan Universe.
The Q2 results marked the highest single quarter in RBC I&TS’ Universe history, and helped raise the median plan’s year-to-date return to 1.4 percent following severe losses in Q1.
Growth stocks eventually outperformed value following a short increase in cyclical stocks, as global equity markets recovered most of their losses since March.
The strong Canadian dollar reduced some local currency returns for unhedged plans, but overall the median pension plan generated 13.9 percent in non-Canadian equity holdings.
The Toronto Stock Exchange composite reported 17 percent returns, led by the information technology, materials, consumer discretionary and energy sectors, while a positive return of 8.7 percent in fixed income securities was driven by the decline in longer term yields and the tightening of credit spreads.
David Linds, managing director and head of asset servicing at RBC I&TS, said: “The actions the Bank of Canada and federal government have taken over the past months to support the economy and financial system are unprecedented and the markets have been quick to respond.”
“In this environment where so many of us are at home, it continues to be somewhat of a winner-takes-all scenario, with the market being driven primarily by companies that have continued to exhibit growth and safe haven investments, while the long term implications of COVID-19 on the economy are unclear.”
The Q2 results marked the highest single quarter in RBC I&TS’ Universe history, and helped raise the median plan’s year-to-date return to 1.4 percent following severe losses in Q1.
Growth stocks eventually outperformed value following a short increase in cyclical stocks, as global equity markets recovered most of their losses since March.
The strong Canadian dollar reduced some local currency returns for unhedged plans, but overall the median pension plan generated 13.9 percent in non-Canadian equity holdings.
The Toronto Stock Exchange composite reported 17 percent returns, led by the information technology, materials, consumer discretionary and energy sectors, while a positive return of 8.7 percent in fixed income securities was driven by the decline in longer term yields and the tightening of credit spreads.
David Linds, managing director and head of asset servicing at RBC I&TS, said: “The actions the Bank of Canada and federal government have taken over the past months to support the economy and financial system are unprecedented and the markets have been quick to respond.”
“In this environment where so many of us are at home, it continues to be somewhat of a winner-takes-all scenario, with the market being driven primarily by companies that have continued to exhibit growth and safe haven investments, while the long term implications of COVID-19 on the economy are unclear.”
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