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Negative fixed income returns offset solid equity gains
TORONTO, April 29, 2021 /CNW/ - Amidst an improved economic outlook – partially attributable to early phase vaccine rollouts and ongoing government support – Canadian DB pension plans posted a -0.2% median return in Q1 2021, according to the RBC Investor & Treasury Services All Plan Universe. The loss came on the heels of a Q4 2020 return of 5.4% and an annual 2020 return of 9.2%.
As projections pointed to higher expected growth, investors readied themselves for mounting inflationary pressure, causing bond yields to move up sharply and fixed income securities to lose ground. Fixed income assets held by pension plans posted a median return of -7.1% in Q1 2021, compared to 1.1% in Q4 2020. The FTSE TMX Universe Canadian Bond Index returned -5.0%, with interest-rate-sensitive longer-dated bonds (FTSE TMX Long Term index -10.7%) underperforming their shorter-dated bond counterparts (FTSE Short Term index -0
Staff
Although equities markets hit new heights in the first quarter, the median return of Canadian defined benefit (DB) pension plans was negative as rising bond yields led to plummeting prices for fixed income securities.
According to the RBC Investor & Treasury Services All Plan Universe index, Canadian DB plans posted a median return of -0.2% in Q1, down from a median return of 5.4% in the fourth quarter. Fixed income assets held by DB pensions had a median return of -7.1%, down from 1.1% in Q4.
“As projections pointed to higher expected growth, investors readied themselves for mounting inflationary pressure,” RBC said in a release.