Canadian Treasurer

May 5 , 2016

Uneven markets challenge Canadian pensions in Q1: RBC Investor & Treasury Services

TORONTO--Global market volatility in early 2016 contributed to a 0.03 per cent decline in Canadian defined benefits pension plans' returns in Q1, according to the $650 billion RBC Investor & Treasury Services All Plan Universe, the industry's most comprehensive universe of Canadian pension plans. The loss comes on the heels of a 3.1 per cent Q4 2015 return and annual return of 5.4 per cent in 2015.

Global equities lose ground; Canadian equities post gains to stem losses
Global equities reversed their Q4 2015 gains of 8.9 per cent, achieving returns of -6.2 per cent in Q1, slightly better than the -7.2 per cent loss experienced by the MSCI World Index during the quarter, but a significant swing into negative territory nonetheless. Meanwhile, their Canadian counterparts recovered ground, posting Q1 returns of 4.6 per cent in Q1 versus -0.5 per cent in Q4 2015.

"Global uncertainty created a volatile start to the year for markets around the world before stabilizing somewhat as the year progressed," said David Heisz, chief executive officer, RBC Investor Services Trust, RBC Investor & Treasury Services. "The TSX Composite Index posted a 4.5 per cent gain in Q1 after one of the worst starts to a year, while commodities, particularly gold and oil, ended the quarter on a strong run and boosted the performance of Canadian companies in the energy and materials sectors."

Despite posting strong results, equity markets in Europe, Japan and China all experienced weakness in their respective currencies and overall global equity returns of -6.2 per cent weighed on Canadian defined benefit plans in Q1 2016.

"Investors were buffeted by global market volatility in early 2016," said Craig Wright, senior vice-president and chief economist, RBC. "Concerns with respect to the Chinese economy, commodity prices and central bank actions nudged markets in a negative direction before anxiety eased and markets rebounded in mid-February. Meanwhile, economic data during this period pointed to the global economy experiencing modest growth."

Fixed Income assets: steady on
As concerns around a potential near-term tightening in Canadian monetary policy eased in Q1 2016, Canadian bonds returned 1.8 per cent for defined benefit plans, up from Q4 2015 returns of 1.1 per cent and slightly better than the FTSE TMX Universe Canadian Bond Index Q1 return of 1.4 per cent.

The domestic currency market also experienced a rebound in Q1 2016 with the Canadian dollar recovering from January lows to appreciate seven per cent against the U.S. dollar by the end of March. Interest rate expectations, appreciating oil prices, improved financial conditions and stronger than expected Canadian economic growth helped fuel the rally.

For the past 30 years, RBC Investor & Treasury Services (RBC I&TS) has managed one of the industry's largest and most comprehensive universes of Canadian pension plans. The "All Plan Universe" currently tracks the performance and asset allocation of over $650 billion in assets under management across Canadian defined benefit (DB) pension plans, and is a widely-recognized performance benchmark indicator. The RBC Investor & Treasury Services "All Plan Universe" is produced by

RBC I&TS' Risk & Investment Analytics (R&IA) service. R&IA work in partnership with best-in-class technology to deliver independent and cost effective solutions designed to help institutional investor clients monitor investment decisions, optimize performance, reduce costs, mitigate risk and increase governance capability.

RBC Investor & Treasury Services (RBC I&TS) is a specialist provider of asset services, custody, payments and treasury services for financial and other institutional investors worldwide. We serve clients from 20 countries across North America, Europe, Asia and Australia, delivering services to safeguard client assets and maximize liquidity. As a strong, stable partner, focused on meeting our clients' evolving needs, RBC I&TS has an unwavering commitment to managing operational risk in our business and the highest credit ratings among our peers (determined by Standard & Poor's and Moody's credit ratings as at November 25, 2015). Rated by our clients as the #1 global custodian for five consecutive years (Global Custody Survey, Global Investor ISF, 2011 to 2015), RBC I&TS is trusted with nearly USD 3 trillion in client assets under administration as at January 31, 2016 (RBC quarterly results released February 24, 2016).



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