Staff
Although equities markets hit new heights in the first quarter, the median return of Canadian defined benefit (DB) pension plans was negative as rising bond yields led to plummeting prices for fixed income securities.
According to the RBC Investor & Treasury Services All Plan Universe index, Canadian DB plans posted a median return of -0.2% in Q1, down from a median return of 5.4% in the fourth quarter. Fixed income assets held by DB pensions had a median return of -7.1%, down from 1.1% in Q4.
“As projections pointed to higher expected growth, investors readied themselves for mounting inflationary pressure,” RBC said in a release.
Canadian plan returns hurt by drop in fixed-income markets
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Canadian corporate and public pension plan returns in the RBC Investor & Treasury Services universe were flat in the first quarter, with a slight median gross decline of 0.2%.
The return for the quarter (down from a 5.4% increase in the fourth quarter) was primarily due to fixed-income securities losing ground during a quarter that saw global equity markets continue to rally, according to a news release Thursday.
Fixed-income assets held by pension plans had a median return of -7.1% in the three months ended March 31, compared to a return of 1.1% in the prior quarter.
Canadian pension funds boost allocation to alternatives Monday, March 08, 2021
Laxman Pai, Opalesque Asia:
As an effective way to derisk, Canadian defined benefit plans are gravitating toward greater allocations to alternative investments, said a survey.
A survey from RBC Investor & Treasury Services revealed: Canadian defined benefit pension plans are continuing to explore various types of alternative investments to provide higher risk-adjusted returns over the longer term and enhance the sustainability of their plans.
The annual survey, which includes the aggregate responses of 122 pension plans across Canada, cites the use of alternative investments - in particular, real estate and infrastructure - as an effective de-risking strategy, second only to liability-driven investments (LDIs).
Canadian pension plans boost allocations to alts – survey
Bloomberg
Canadian defined benefit plans are gravitating toward greater allocations to alternative investments and see them as an effective way to derisk, according to a survey from RBC Investor & Treasury Services.
The annual survey of 122 Canadian DB plans, conducted in November, also shows plan executives overriding concern is the low-interest-rate environment, as the percentage of plans that are fully funded has dropped.
RBC s survey shows 73% of Canadian DB plans overall currently hold alternatives or expect to add them, up from 71% in 2019, and 96% of larger plans (with more than $5 billion in assets) hold them or expect to do so, compared to 90% in 2019.
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