Within the CAD 340 billion RBC Dexia universe, Canadian pension plans lost 3.2% in the three months ending June 30, 2010, erasing first quarter gains while bringing year-to-date results into negative territory at 1.4%. The decline in the second quarter comes after four consecutive quarters of positive returns, according to a press release.
Non-Canadian equities was the hardest hit asset class, dropping 8.3% in the quarter while only outperforming the MSCI World Index by 0.2%. Exchange rates were a key factor again this quarter as the MSCI World Index fell by 11.2% in local currency terms, but a weaker Canadian dollar against most major currencies helped soften the blow for unhedged pensions.
Canadian equity markets fared little better, losing 5.5% in the quarter as most sectors retreated. The top heavy Financials sector fell 9.8% and accounted for the majority of the decline. Pensions also lagged the S&P TSX Composite Index by 1.1% in the quarter largely because of poor performance in the Materials sector, likely caused by an under-exposure to gold stocks, RBC Dexia said.
Bonds provided some relief, earning 3.1% while surpassing the DEX Universe bond index by 0.2% for the quarter. As well, corporate bonds lagged government debt for the first time in six quarters.“Longer duration bonds outperformed in the quarter allowing pension plans with liability matching strategies to do better,” said Don McDougall, Director of Advisory Services for RBC Dexia, in the announcement.