Assets from Canadian Pension Plans Take a Hit

Following seven consecutive years of positive returns, Canadian pension plans took a turn for the worst on Tuesday, delivering negative returns in asset classes across the board.

According to RBC, growing economic concerns, as well as Canada’s weakening energy and resource sectors, have weighed heavily on defined benefit pension plan assets, which have declined by 1.6 per cent for the second quarter of 2015.

This decline marks the largest down slide in pension assets since 2011, when they fell -5.5 per cent.

"Uncertainty in the global economic landscape - particularly surrounding the deteriorating situation in Greece - and the ongoing fallout from the drop in the price of oil put pressure on pension plan performance over the past quarter," said David Heisz, chief executive officer, RBC Investor Services Trust, RBC Investor & Treasury Services. “Additionally, long-term bond yields trended higher in Q2, retracing to levels seen prior to the Bank of Canada's rate cut in January. While returns on bond holdings have been negatively impacted, the higher yields would have eased the pressure on plans' solvency ratios as projected liabilities move inversely with long-term interest rates."

Canada’s equities have also seen a hit, losing 1.4 per cent this quarter.

"The decline in oil price levels continue to take a toll on Canadian energy companies, with the energy sector falling by 4.3 per cent in the quarter. Prices for gold and base metals also slid on weak demand, and we have yet to see anticipated growth in Canadian exports as a result of the weaker loonie," added Heisz.

RBC Investor and Treasury Services manages one of Canada’s most comprehensive pension plans, the “All Plan Universe.” The plan tracks the performance and asset allocation of over $650 billion in assets under management across Canadian defined benefit pension plans.