Equity and bond markets start year in the
red due to geopolitical tensions, inflationary pressures, continued
Covid crisis
TORONTO, April 29,
2022 /CNW/ - Canadian defined benefit pension plans
closed the first quarter of 2022 in the red with a median return of
-5.5%, the weakest quarterly return since Q1 2020 (-7.1%) according
to the RBC Investor & Treasury Services All Plan
Universe.
"The market experienced growing economic and geopolitical
uncertainties during the first quarter of 2022," said Niki
Zaphiratos, Managing Director, Asset Owners, RBC Investor &
Treasury Services. "Russia's
invasion of Ukraine has amplified
existing investor anxiety over growing inflationary pressures and
the Covid crisis."
Global equity markets experienced significant volatility during
the quarter, with the MSCI World Index returning -6.2% over that
period. Concerns over higher interest rates and further disruptions
to global supply chains resulted in growth style stocks (MSCI World
Growth -10.7%) significantly underperforming value style stocks
(MSCI World Value -1.8%).
Foreign equities in the RBC All Plan Universe returned -7.5%
during the quarter. Strength in the Canadian dollar deepened some
of the local currency losses for unhedged plans.
The Canadian equity market (S&P/TSX Composite +3.8%)
benefitted from its large exposure to surging commodity stocks and
was the only developed equity market to finish in positive
territory over the quarter. Strength in the Energy (+28.7%) and
Materials (+20.1%) sectors were somewhat tempered by losses in the
Information Technology (-35.5%) sector. Canadian equities held by
plans outperformed the broad market index and gained 3.9%.
Bond yields moved up sharply across the yield curve, as central
banks moved away from the pandemic era ultra-loose monetary
policies and signalled aggressive actions to combat growing
inflationary pressures. The FTSE Canada Universe Bond Index lost
-7.0% over the quarter, as long term bonds (FTSE Canada Long Term
Bond Index -11.7%) underperformed short term bonds (FTSE Canada
Short Term Bond Index -3.0%). The median RBC All Plan Universe
Canadian Fixed Income return was -9.8%.
"The current geopolitical risk has compounded the existing
headwinds facing pension plans – and we are now looking at the
possibility of a sharp increase in interest rates which could lead
to the devaluation of risky assets," stated Zaphiratos. "Plan
sponsors will need to tread carefully in the months ahead."
Historic
performance
|
Period
|
Median return
(%)
|
Period
|
Median return
(%)
|
Q1 2022
|
-5.5
|
Q4 2019
|
2.0
|
Q4 2021
|
4.5
|
Q3 2019
|
1.7
|
Q3 2021
|
0.6
|
Q2 2019
|
2.7
|
Q2 2021
|
4.4
|
Q1 2019
|
7.2
|
Q1 2021
|
-0.2
|
Q4 2018
|
-3.5
|
Q4 2020
|
5.4
|
Q3 2018
|
0.1
|
Q3 2020
|
3.0
|
Q2 2018
|
2.2
|
Q2 2020
|
9.6
|
Q1 2018
|
0.2
|
Q1 2020
|
-7.1
|
Q4 2017
|
4.4
|
About the RBC Investor &
Treasury Services All Plan Universe
RBC Investor & Treasury Services has managed one of the
industry's largest and most comprehensive universes of Canadian
pension plans for more than 30 years. The All Plan Universe, a
widely recognized performance benchmark indicator, tracks the
performance and asset allocation of a cross-section of assets
across Canadian defined benefit pension plans. The All Plan
Universe is produced by RBC Investor & Treasury Services' Risk
& Investment Analytics service, which delivers independent and
cost effective solutions that help institutional investors monitor
investment decisions, optimize performance, reduce costs, mitigate
risk and enhance governance.
About RBC
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approach to delivering leading performance. Our success comes from
the 88,000+ employees who leverage their imaginations and insights
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About RBC Investor & Treasury
Services
RBC Investor & Treasury Services (RBC I&TS)
provides asset and payment services to corporate investors and
financial institutions globally. Trusted with CAD 4.7 trillion in assets under administration,
clients are at the heart of our service offering. As a financially
strong partner, our focus is on safeguarding client assets as we
leverage data and technology solutions to deliver meaningful
insights, simplify our clients' operations and support their
growth.
SOURCE RBC Investor & Treasury Services