Canadian pension plans ended the year barely in positive territory, thanks to an impromptu October market rally that helped lift retirement assets by 4.2% in the fourth quarter, according to a survey by RBC Dexia Investor Services.
Canadian pensions earned just 0.5% for the year ended Dec. 31, 2011. “It’s been a tumultuous year for global markets,” said Don McDougall, director of advisory services with RBC Dexia. “We had a natural disaster in Japan, geopolitical tensions in the Middle East, a stubborn U.S. recovery with its ensuing political backlash, sputtering Chinese growth and the ever-lingering European debt crisis—most pensions will be pleased its over.”
Canadian equity was the hardest hit asset class during the year as the S&P TSX Composite Index dropped 8.7%. “Weakness in the three largest sectors—materials (down 21%), energy (down 10%) and financials (down 3%)—accounted for the bulk of the market’s decline,” explained McDougall. “Pensions trailed the S&P TSX Composite by 0.9% for the year despite outperforming the benchmark by 0.6% in the December quarter.”
Foreign equities also moved backwards during the year, losing 4.2% while underperforming the MSCI World Index by 1%.
Bonds provided the needed support, advancing 9.8% over the last 12 months on the heels of a late-year rally. “Fixed income strength continued to come from declining longer-term bond yields as the DEX Long Term Bond Index (up 18.1%) had its best calendar year result since 1997,” said McDougall.
This article was originally posted on BenefitsCanada.com.