Healthy fourth quarter performance bounced Canadian pension fund returns back into double-digits for a second consecutive year, according to a quarterly survey just released by BENCHMARK, the investment analytics arm of RBC Global Services.
Within the $340 billion BENCHMARK universe, balanced funds earned 5.3 per cent in the quarter ending December 2004, boosting year-end performance to 10.1 per cent.
“This year, as last year, markets rallied in the final quarter,” says Don McDougall, Director, BENCHMARK, RBC Global Services. “Half the annual gains were concentrated in those final three months – a strong finish, however, 2004 did not quite match the 13.5 per cent annual return posted in 2003.”
Canadian equities – the top-performing asset class for the last seven quarters – returned 15.7 per cent in 2004. Active managers outperformed the market by 1.2 per cent, capturing superior returns in materials and industrials, while maintaining exposure to the energy and financial sectors.
Global stock markets also gathered momentum, pushing the annual MSCI World index to 11.3 per cent in local currency. For Canadian-based investors, continued appreciation of the loonie – particularly against the US dollar -slashed foreign equity returns to 6.5 per cent, once currency was taken into account.
“2004 was not just about equities. Low interest rates buoyed domestic bonds,” adds McDougall. Canadian fixed income managers averaged 7.2 per cent over the year, keeping pace with the Scotia Capital Universe Bond Index.