Markets slam Canadian pension plans: survey

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Toronto— The Canadian Press
Published Friday, Oct. 21, 2011 9:03AM EDT
Last updated Friday, Oct. 21, 2011 9:08AM EDT

Canadian pension plans took a severe hit from turbulent world equity markets during the third quarter, a new study by RBC Dexia has found.

The organization says the Canadian pension plan assets that it tracks dropped 5.5 per cent in the three-month period ended Sept. 30.

So far this year the pensions have lost 3.2 per cent of their value, RBC Dexia said.

The company is equally owned by Royal Bank of Canada and Dexia, a Belgian bank that's in financial trouble. RBC has said it's in talks to acquire full ownership of the joint venture.

The RBC Dexia report on pensions said numerous factors affected momentum during the third quarter, including persistent uncertainty about the sovereign debt crisis in Europe, the downgrade of the U.S. from a AAA rating by S&P, and concerns that the situation could worsen.

The hardest hit asset type within Canadian pension portfolios were Canadian equities.

The main index at the Toronto Stock Exchange was down 12 per cent in the quarter, the lowest quarterly result since the 2008 financial crisis, RBC Dexia said.

“The pull back actually started in April followed by six consecutive months of negative returns on Canadian stocks,” said Don McDougall, the director of advisory services at RBC Dexia.

“Pensions trailed the S&P/TSX composite (index) by 1.6 per cent for both the quarter and nine months.”

Global equities were down as well, with the MSCI World index off nearly 10 per cent for the quarter.

“Exchange rates were a key factor this quarter as a weaker Canadian dollar against most major currencies — particularly the U.S. dollar, helped reduce the loss to Canadian investors,” noted McDougall.

The weakness gave bond markets a boost, however, as that market rose 5.1 per cent in the quarter as investors moved into less risky bets.