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The performance of pension funds, held back by the global slowdown


Alain Thériault

August 9, 2019 09:30

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After a strong first quarter, the pension funds have made returns much more modest in the second quarter of 2019, according to the report of RBC investor Services and treasury and BNY Mellon Canadian Master Trust Universe (CIBC Mellon), services for institutional investors of both banks.

In its sector of canadian pension plans, defined benefit plans, RBC reported a return of 2.7 % in the second quarter of 2019 in the crates that covers its service. It is, according to RBC, a decline compared to the performance of 7.2 % registered in the first quarter of the year. Investments in canadian equities in the pension fund that covers CBR have posted a return of 2.3 % in the second quarter of 2019, compared with 12.4 % in the previous quarter.

RBC points out that the mid year performance of the regimes that make up his universe amounted to 10.2% in the first half of 2019, despite a second quarter was more modest than the first.

Global slowdown on the backdrop of political unrest

Plan sponsors canadian record median returns decline in a context of slowing global growth, according to CIBC. “The world’s stock markets have fluctuated during the second quarter, and with only a modest rate of return compared to the higher returns of the previous quarter,” said Catherine Thrasher, strategic solutions, client solutions and global risk management, CIBC Mellon and BNY Mellon.

RBC abounds in the same direction. “The first half of 2019 has been positive for the canadian pension plans, defined benefit plans, and all indications are that the canadian economy is doing well, but small flaws start to appear. The hustle and bustle geopolitical and commercial continues, as the slowdown of the global economy, and canadian investors are increasingly aware of the impact of these factors on our markets and our economy. The growth in the second quarter can be described as healthy, but modest, and the managers will need to remain cautious and actively manage their portfolios and their exposure to risk, ” said Ryan Silva, director general and ceo, retirement plan and insurance, coverage of global clients of RBC investor Services and treasury services.

The traditional assets on the rise

At CIBC, Ms. thrash force adds, however, that despite the market volatility and the slowdown in global growth, all traditional asset classes have posted positive results for the quarter and had a better rate of return than alternative assets. Composed of 84 large companies, universities and public services, the universe of the BNY Mellon Canadian Master Trust Universe was able to determine that the canadian fixed income securities posted the best returns of the asset classes, with a median return quarterly +2,92 % and a yield on one-year +8,33 %.

According to this universe, the performance of canadian equities has been more moderate in the second quarter, but still positive, with a median return quarterly +1,95 %. U.s. equities also posted positive results in the second quarter of 2019, with a yield of +the 1.36 %, but lower than that of the u.s. stock exchange index. The median returns of international equities and non-canadian, came behind those actions and non-u.s., but they were positive at +1.20% and +1,41%, respectively.

Clues in not crates

According to the report of RBC, the performance of stock market indices was also affected by the environment of the world. Thus, the composite index S&P/TSX posted a return of 2.6% in the second quarter of 2019, compared to 13.3 % in the first quarter of 2019. Among the 11 sectors of the composite index S&P/TSX composite, seven have ended the quarter in positive territory, also points to the report. He adds that in the first quarter of 2019, the 11 had posted gains.

According to RBC, the bond index universal FTSE Canada has produced a return of 2.5% in the second quarter, compared to 3.9% in the first. For its part, the MSCI World index generated a return of 1.7 % in the second quarter, down from 10 % in the previous quarter.

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