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.

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.

About RBC Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 92,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada’s biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our 17 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.

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