Canadian corporate and public pension plans in the RBC Investor & Treasury Services universe saw a median gross return of 3.8% in the three months ended Dec. 31.
However, despite the positive returns seen in the fourth quarter, the universe still experienced a median gross return of -10.3% for the full year ended Dec. 31.
The annual median return was the lowest for the universe since the financial crisis when it posted a median gross return of -15.3% for the year ended 2008, said Niki Zaphiratos, managing director, asset owners, at RBC Investor & Treasury Services, in a news release Tuesday.
"Pensions gained traction toward the end of 2022 despite the ongoing volatility caused by embedded inflation and subsequent higher interest rates imposed by central banks," Ms. Zaphiratos said. "However, this was not enough to offset the first two quarters of heavy losses."
The universe returned -5.5% and -8.6% in the first and second quarters, respectively, and had a relatively flat return of 0.5% for the third quarter.
Canadian equities held by Canadian pension plans returned a median gross 6.3% for the fourth quarter, slightly outperforming the S&P/TSX Composite index, which returned 5.9% for the period. For the year, Canadian equities returned a median gross -3.6%, above the -5.8% return for the S&P/TSX Composite index.
Canadian pension plans' foreign equities returned a median 9.7% for the three months ended Dec. 31 and returned -11.3% for the year, slightly ahead of the MSCI World index return of -12.2% for the period. The news release also said plans with unhedged U.S. dollar exposure benefited from that currency's appreciation, while value stocks outperformed growth stocks.
The news release did not provide a fourth-quarter median return for fixed-income securities held by Canadian pension plans, but it said that asset class had the largest decline in more than 30 years.
Fixed income returned a median gross -16.8% for the year ended Dec. 31, below the return of -11.7% for the FTSE Canada Universe Bond index for the period.
"It was a challenging year for pension asset managers," Ms. Zaphiratos said. "Both equities and fixed-income asset classes, which typically offset each other, experienced losses. However, the rapid rise in bond yields resulted in the lowering of pension liabilities — and most pensions ended the quarter in a better position."