A pair of reports, from RBC Investor Services and Mercer, coupled with an earlier report from Aon plc describe Canadian defined benefit (DB) pension plans as being steady and stronger in the first half of 2023.
The RBC report on the performance of Canadian DB plans within its All-Plan Universe, a quarterly benchmark tracking a cross-section of Canadian DB pension plans, shows that plans demonstrated a modestly positive quarterly return of 0.8 per cent overall during the second quarter of 2023; they are also up 4.8 per cent over the first half of the year.
“During the quarter, foreign equities emerged as the top performing asset class in the peer universe, boasting a median return of 2.9 per cent,” they write. “In comparison, the MSCI World index returned 4.5 per cent, primarily driven by the robust performance of the information technology (up 12.1 per cent) and consumer discretionary (up 8.1 per cent) sectors. It is noteworthy that the strength of the Canadian dollar had a softening effect on the returns of pension plans invested in foreign equities, as the MSCI World index recorded a 7.1 per cent return in local currency terms. Consequently, hedged pension plans outperformed their unhedged counterparts.”
According to the report, U.S. equities significantly outperformed international equities, while Canadian equities returned 1.3 per cent.
Earlier in July, Mercer meanwhile reported that positive asset returns and an increase in bond yields led to an improvement in the funded positions of most DB pension plans it covers. In the second quarter of 2023, the Mercer Pension Health Pulse, which tracks the median solvency ratio of plans in Mercer’s database, increased from 116 per cent at the end of the first quarter, to 119 per cent at the end of June 2023. “This increase occurred despite a scare around the U.S. debt ceiling and the lingering after-effects of the banking crises,” they write.
Related:
Aon publishes aggregate funded status of Canadian defined benefit plans
