Equities stay strong, but fixed income dampens DB pension plan returns in Q2 Français
"We hope that mid-April marked the bottom for global equity markets, given the steady recovery since then, buoyed in Canada by a 90-day tariff pause and stable inflation," said Isabelle Tremblay, Director, Segment Lead – Asset Owner, RBC Investor Services. "Momentum continued as tariff relief and Canadian government stability contributed to policy clarity and a more predictable domestic outlook."
"Canadian equities continued to deliver, and plans with higher domestic allocations reaped the benefits. But with long bonds under pressure and volatility still present, most plan sponsors are staying the course and waiting for clearer signals," Tremblay added.
Canadian equities returned 9.0% for pension plans in Q2 (10.2% YTD), outperforming the TSX Composite Index, which rose 8.5% in the quarter (also 10.2% YTD). Leading sectors included Information Technology (14.2%), Consumer Discretionary (14.1%), and Financials (12.1%). Notably, four of the five top-performing client pension plans in Q2 were those with the highest exposure to Canadian equities, highlighting the value of domestic positioning.
Foreign equities held by pension plans returned 5.1% in the quarter, accounting for all their YTD gain. In contrast, the MSCI World Index rose 5.7% in Q2 (3.9% YTD). Growth stocks significantly outpaced value, with the MSCI World Growth Index gaining 11.6%, while the MSCI World Value Index declined 0.1%. A strengthening Canadian dollar notably reduced the impact of foreign market gains. For example, while the S&P 500 climbed 10.9% in U.S. dollar terms, the return dropped to 5.2% in CAD after accounting for currency effects. YTD, the S&P 500 was up 6.2% in USD but just 0.8% in CAD.
Pension plans posted a -1.2% return in fixed income for the quarter (+0.9% YTD), underperforming the FTSE Canada Universe Bond Index, which declined 0.6% in Q2 (+1.4% YTD). The lag was driven by a structural overweight in long-duration bonds, which fell 2.3% amid rising long-term yields.
About RBC
Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 97,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada's biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our more than 19 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.
We are proud to support a broad range of community initiatives through donations, community investments and employee volunteer activities. See how at rbc.com/peopleandplanet.
About RBC Investor Services
RBC Investor Services delivers investment servicing solutions to Canadian asset managers and asset owners, insurance providers, investment counsellors and global financial institutions. With more than 1,500 employees and offices across the globe, our focus is on safeguarding the assets of our clients and enabling their growth. Part of Royal Bank of Canada, Canada's largest bank, RBC Investor Services has over C$2.6 trillion of assets under administration. Learn more at rbcis.com.
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