Canadian defined benefit pension plans returned 9.2 per cent overall in 2020 and 5.4 per cent in the last quarter of the year, according to RBC Investor & Treasury Services All Plan Universe survey released Jan. 29.
"It's been a tumultuous time for the markets, but we're seeing positive returns for a third consecutive quarter," said David Linds, Managing Director and Head of Asset Servicing, Canada. "The successful development of multiple Covid-19 vaccines was a contributing factor, as were the anticipated government support packages and the conclusion of the US elections."
He says global equity markets, propelled by the investor optimism posted solid returns in the fourth quarter of 2020, with stocks in the energy and financials sectors leading those gains. Value stocks outperformed growth stocks over the quarter, but growth stocks far outdistanced value for the year.
Linds forecasts that in 2021 investor confidence may be tempered due to uncertainty surrounding the vaccine rollout, new virus strains, and other unknowns that could put pressure on equity markets.
Foreign equities were the top-performing asset class in 2020, returning 12.6% overall, versus 13.9% for the benchmark MSCI World Index (10.1% and 8.7% respectively in Q4). Canadian equities returned 4.1% for the year (9.4% for the quarter), whereas the benchmark TSX Composite Index returned 5.6% for the year (9.0% for the quarter).
Domestic bonds returned 11.1% in 2020 (1.1% in Q4), compared to 8.7% for the FTSE TMX Canada Universe Bond Index (0.6% in Q4). The FTSE TMX Long Bond Index returned an annual 11.9% versus the FTSE TMX Short Term Bond Index's annual return of 5.3%, says to RBC Investor & Treasury Services.
