Ms. Marijana Jovanovic reports

RBC INVESTOR SERVICES REPORTS CANADIAN DB PENSION PLANS RETURN 8.2% IN Q4, ENDING THE YEAR UP 9.1%

Royal Bank of Canada's RBC Investor Services (RBCIS) reported strong financial performance for their Canadian defined benefit (DB) pension plans, as they achieved an 8.2-per-cent median return in Q4 and closed the year with an impressive 9.1-per-cent return as of Dec. 31, 2023 -- significantly rebounding from the minus-10.3-per-cent return reported in 2022. This analysis encompasses various client plans across private and public sectors.

Marijana Jovanovic, managing director, head of product development at RBCIS, stated: "This quarter represents the third-best performance in over two decades, with notable quarters in Q2 2020 and Q2 2009. Positive returns in both fixed income and equity markets during Q4 were driven by investor optimism over potential near-term interest rate cuts amid decreasing inflationary pressures."

Ms. Jovanovic emphasized the nuanced landscape, noting: "Potential future inflation arising from the Red Sea crisis introduces uncertainties impacting global trade and supply chains. Geopolitical tensions, notably conflicts in the Middle East and Ukraine, are also under consideration as plan managers adapt their strategies to navigate this environment."

Global equities delivered a 7.9-per-cent return for the quarter and a 16.3-per-cent annual return, trailing the MSCI World index's 8.7-per-cent return for the quarter and 20.5-per-cent annual return. Within the benchmark, information technology emerged as the top-performing sector, boasting a 14.6-per-cent return for the quarter and an impressive 49.2-per-cent return for the year. Real estate secured the second spot for the quarter with a solid 14.3-per-cent return, while communication services claimed the second-highest-performing sector for the year with a 41.7-per-cent return. Growth stocks significantly outperformed their value counterparts -- the MSCI World Growth index returned 33.3 per cent over the year compared with 8.5 per cent for the MSCI World Value index.

Canadian equities aligned with the positive trend, posting a 7.5-per-cent return in Q4 (10.9 per cent for the year), closely tracking the 8.1-per-cent Q4 return for the TSX Composite index (11.8 per cent for the year). The divergence in global and Canadian equities performance was primarily attributed to the fact that the Canadian market has lower exposure to the in-favour growth-style stocks.

The Canadian fixed income asset class benefited from declining yields and tightening credit spreads, and showcased robust performance with a quarterly return of 10.9 per cent (7.8 per cent over the 12-month period), outshining the FTSE (Financial Times Stock Exchange) Canada Universe Bond index, which returned 8.3 per cent and 6.7 per cent, respectively. Specifically, interest-rate-sensitive long-term bonds stole the spotlight with a 14.8-per-cent return for the quarter and a commendable 9.5-per-cent return over the year. Conversely, short-term bonds within the benchmark returned 4.1 per cent for the quarter and 5 per cent for the year.

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