RBC Investor & Treasury Services Survey: Canadian pension returns flat in second quarter

TORONTO - Pension assets remained unchanged during the second quarter of 2013, as a spike in interest rates in June negated advances in April and May, according to the latest survey from RBC Investor & Treasury Services.

According to the $460 billion RBC Investor & Treasury Services All Plan universe – the industry’s most comprehensive universe of Canadian pension plans – defined benefit (DB) pensions returned zero per cent for the quarter ending June 30, 2013, keeping year-to-date results at 4.5 per cent.

“Market volatility returned in June following the Fed’s statements regarding its commitment to quantitative easing,” said Scott MacDonald, head, Pension Segment Development for RBC Investor & Treasury Services. “While all DB plans benefit from rising long term bond yields as pension liabilities are reduced, those with risk mitigating liability driven investment strategies were the hardest hit during the quarter.”

Bonds had their largest three month decline since 1994, losing 2.5 per cent in the quarter and 1.7 per cent over six months. “Weakness was across the market, but longer duration bonds were the most affected, as the DEX Long Term Index declined 4.6 per cent in the quarter and DEX Real Return Bonds are down 11 per cent year-to-date,” noted MacDonald.

Canadian equities also lost ground within pension plans, declining 1.2 per cent compared to the S&P/TSX Composite, which was down 4.1 per cent in the quarter. “The decline in the materials sector and mining stocks in particular continued to be the key factor affecting performance this quarter. Looking at the year-to-date figures, most pensions stayed in positive territory despite the market’s loss by remaining underexposed to the sector and have subsequently outperformed the index by 4.2 per cent,” said MacDonald.

Foreign stocks provided the needed support this quarter, gaining 4.7 per cent, mostly due to continued positive performance in the U.S. equities market. This compares to the MSCI World Index which advanced 4.5 per cent in the quarter. “Unhedged pension plans benefitted from the Canadian dollar’s weakness against most major currencies, with FX returns accounting for over half of the gains,” said MacDonald. “Foreign Equities continue to lead year-to-date – up 15.4 per cent in Canadian dollar terms.”

About RBC Investor & Treasury Services
RBC Investor & Treasury Services, part of Royal Bank of Canada (RY on TSX and NYSE), is a specialist provider of custody, payments and treasury services for financial and other institutional investors worldwide. The Investor & Treasury Services segment is comprised of three businesses: Global Financial Institutions, Investor Services and Treasury Services. Active in 15 markets globally, RBC Investor & Treasury Services provides custodial, advisory, financing and other services to safeguard clients’ assets, maximize liquidity and manage risk in multiple jurisdictions. RBC Investor & Treasury Services is ranked among the world’s top 10 global custodians, with $3.11 trillion in client assets under administration.

About RBC

Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate under the master brand name RBC. We are Canada’s largest bank as measured by assets and market capitalization, and are among the largest banks in the world, based on market capitalization. We are one of North America’s leading diversified financial services companies, and provide personal and commercial banking, wealth management services, insurance, and investor services and wholesale banking on a global basis. We employ approximately 80,000 full- and part-time employees who serve more than 15 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 44 other countries. For more information, please visit rbc.com.

RBC supports a broad range of community initiatives through donations, sponsorships and employee volunteer activities. In 2012, we contributed more than $95 million to causes worldwide, including donations and community investments of more than $64 million and $31 million in sponsorships.