Canadian Defined Benefit pension plans posted a -0.2% median return in Q1 2021, according to the RBC Investor & Treasury Services All Plan Universe report released April 29. 

This loss followed a Q4 2020 return of 5.4% and an annual 2020 return of 9.2% for DB plans. 

The report explains that as projections pointed to higher expected growth, investors readied themselves for mounting inflationary pressure, causing bond yields to move up sharply and fixed income securities to lose ground. Fixed income assets held by pension plans posted a median return of -7.1% in Q1 2021, compared to 1.1% in Q4 2020.

Meanwhile, global equity markets continued to rally and hit new highs during this time period, notes RBC Investor & Treasury Services. Canadian DB plans' foreign equities returned a modest 3.7% in Q1 2021. Canadian equities benefitted from their significant exposure to cyclical sectors and delivered solid gains in Q1, posting 8.6%.

"We have seen the markets price in a very optimistic economic scenario based on forecasts of strong GDP growth, the gradual ramping up of the vaccine supply and fiscal and monetary stimulus," stated David Linds, Managing Director and Head of Asset Servicing, Canada, RBC Investor & Treasury Services. "However, plan sponsors should continue to be on guard for risk factors such as the emergence of potent Covid-19 variants and supply constraints in a highly competitive global vaccine market."