A new study by RBC Investor & Treasury Services (I&TS) found that Canada’s defined benefit pension plans took a “big hit” last year amid uncertain global economic conditions.
a The survey was announced on Tuesday found that the median annual return for pension assets within the RBC I&TS universe in 2022 was -10.3%. This is the lowest since his 2008 recession, when the median annual return was -15.9%.
These results came despite a positive Q4 when pension assets returned 3.8% in the last three months of the year.
Niki Zaphiratos, managing director of asset owners at RBC Investor & Treasury Services, said in the report, “Despite continued volatility caused by built-in inflation and subsequent higher central bank interest rates, 2022 “Pensions picked up momentum towards the end of the year.”
“However, this was not enough to offset the heavy losses in the first two quarters.”
The report said persistently high inflation and rising interest rates contributed to last year’s volatility as yields rose “across the spectrum.”
The report said weakness spread across markets, but “inflation-sensitive long-duration bonds were hit the hardest.”
Canada’s pensions saw “largest annual fixed-income decline in more than 30 years”, falling 16.8% in 2022 compared to -11.7% for the FTSE Canada bond index, according to report Did.
“It’s been a difficult year for pension asset managers,” Zafiratos said, adding that “most pensions ended the quarter in better positions” after bond yields rose sharply and pension liabilities fell. Stated.
Foreign stocks were the top performing asset class in the fourth quarter, but fell -11.3% for the full year, according to RBC.
Domestic equities were the best-performing asset class for the year, while developed markets delivered “healthy local currency returns” in the fourth quarter.
Value stocks will outperform growth stocks in 2022, “finishing the year well ahead of growth stocks.”
“Over the next few months, plan sponsors will continue to monitor the economic impact of central bank actions, continued geopolitical tensions, and ongoing efforts to contain the COVID virus outbreak in certain emerging markets,” Zafiratos said. We need to pay attention to risk factors,” he said.