RBCIS reports 5.1% Q3 return for Canadian pensions, spotlighting top sectors and strategy
RBC Investor Services (RBCIS) reports a median return of 5.1 percent for its clients’ defined benefit (DB) pension plans in the third quarter of 2024, along with a 9.6 percent year-to-date return as of September 30.
This analysis, which RBCIS conducts quarterly, spans various client plans across the private and public sectors.
Global equities within RBCIS DB pension plans achieved gains of 5.5 percent, slightly outpacing the MSCI World Index’s 5.0 percent return.
Utilities (16.1 percent) and Real Estate (15.4 percent) emerged as the leading sectors, while the Information Technology sector, weighted heavily in the benchmark, delivered a modest 0.2 percent, tempering overall performance.
Unlike the first half of the year, value style stocks surpassed growth stocks, with the MSCI World Value Index rising 8.2 percent compared to the MSCI World Growth Index's 2.2 percent return.
The MSCI Emerging Markets Index also performed well, gaining 7.3 percent, primarily driven by a strong Chinese equity market, which posted a 21.9 percent return.
Canadian equities for RBCIS clients, largely oriented toward value style stocks, outperformed their global counterparts with a 9.6 percent return, while the TSX Composite Index showed a 10.5 percent return.
Performance in the TSX was driven by high weightings in the Financials (17.0 percent) and Materials (12.2 percent) sectors.
In Canadian fixed income, RBCIS DB pension plans experienced a return of 4.9 percent, slightly exceeding the FTSE Canada Universe Bond Index’s 4.7 percent return as markets responded favourably to consecutive interest rate cuts by the Bank of Canada.
Within this asset class, long-term bonds outperformed, with the FTSE Canada Long Term Bond Index climbing 5.7 percent, compared to a 3.4 percent return for the FTSE Canada Short Term Bond Index.
“While this quarter marks improved returns for RBCIS DB pension plans, the report emphasizes the ongoing need for diversification and proactive risk management,” stated Isabelle Tremblay, Asset Owner Segment lead at RBC Investor Services.
She noted that with the additional 50 basis point rate reduction by the Bank of Canada in October and the upcoming US presidential election, plan managers are adjusting strategies to navigate the evolving pension landscape.
