Canadian Pension Plans Show Good Returns

April 21, 2006 ( - Canadian pension funds earned 4% for the quarter ending March 2006, according to data from RBC Dexia.

This marks the twelfth consecutive quarter of positive returns for the funds, RBC Dexia said in a news release.   In the latest 12 months, returns averaged 14.9%.

Don McDougall, Director of Advisory Services for RBC Dexia Investor Services noted that stock markets have been strong since reaching a low point in 2003.   “The average Canadian pension plan has realized a robust 15.8% annualized return over three years,” he said in the release.

In domestic equities, pension plans underperformed the S&P TSX composite index by 0.6% in the first quarter of 2006 and by 1.1% in the past year.   However, they still managed a median one-year return of 27%.

For global equity, under-exposure to the US market helped Canadian pension plans outpace the MSCI World index by 0.8% for the quarter.   Since the repeal of the Foreign Property Rule (See  Canadian Pension Plan’s Foreign Investment Limit Lifted), Canadian pension plans are able to increase their global diversification.   According to RBC Dexia data, the median Canadian pension plan increased its foreign equity allocations by 2% over the quarter.

Canadian fixed income did not fare as well, with a 0.4% loss on the quarter, in line with the Scotia Capital Universe Bond Index. Over the year, however, pension plans have averaged a   5.2% return on Canadian bonds.