Canadian equities remained the top-performing asset class in 2005 and lifting Canadian pension plans to another strong showing for the year, according to a quarterly survey just released by the investment analytics arm of RBC Dexia Investor Services.
Within the $340 billion universe, balanced pension funds earned 2.1% in the quarter ending December 2005, bringing year-end performance to a solid 11.7% gain.
“That’s three consecutive years, since the tech bubble in 2002, that longer-term assets have performed extremely well,” said Don McDougall, director of BENCHMARK, RBC Dexia Investor Services.
Canadian equities led the way for a third consecutive year, on the strength of a 63.4% return in energy stocks, which accounted for nearly half of the market’s 24.1% gain in 2005.
Global stock markets also continued to do well, pushing the annual MSCI World index to 15.8% in local currency. For Canadian-based investors, however, continued appreciation of the loonier slashed foreign equity returns to a meagre 6% for the year, once currency was taken into account.
“The loonier has been a major factor over the past three years, first against the US dollar in 2003 and 2004 and this year against the Yen and Euro,” McDougall said.
In Canadian fixed income, managers averaged 6.5% over the year, matching the Scotia Capital Universe Bond Index, despite significant opportunities in real return bonds and longer duration bonds to add value, according to McDougall.