Canadian defined benefit pension plans within the RBC Investor Services All Plan Universe had a median return of -4% in the third quarter of 2023, bringing down the year-to-date performance to 1.9%.
In the first and second quarters of the year, the DB plans has median returns of 4% and 0.8%, respectively, said an Oct. 31 news release.
Fixed-income assets held by these Canadian DB plans declined 6.6% in the third quarter as a result of investors "driving up government bond yields in anticipation of prolonged elevated short-term rates," the release said.
The FTSE Canada Universe Bond Index fell by a net 3.9% in the third quarter.
Meanwhile, stocks held by Canadian DB plans incurred modest losses in the third quarter due to concerns about the impact of sustained high interest rates on global economic growth, the release noted.
Foreign equities held by these DB pension plans declined by a net 1.7% in the third quarter, slightly underperforming the MSCI World Index, which returned a net -1.4%.
Canadian stocks held by Canadian DB plans returned -2.2% in the third quarter, matching the performance of the S&P/TSX Composite Index.
"Despite the negative returns experienced by most (Canadian DB) plans in (the third quarter), their overall financial health improved due to higher yields reducing the present value of their liabilities," said Niki Zaphiratos, managing director and client partner at RBCIS, in the release. "The market's response to geopolitical developments emphasizes the importance of vigilant monitoring and strategic decision-making for asset owners."
