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Aggressive central bank interventions and uncertain economic outlook cited as headwinds
TORONTO, Oct. 31, 2022 /CNW/ – Canadian DB pensions in the RBC Investor & Treasury Services All Plan Universe gained 0.5% in Q3, bringing the year-to-date return to -13.7% for the period ending September 30, 2022.
Niki Zaphiratos, Managing Director, Asset Owners, RBC Investor & Treasury Services, said, “Pensions experienced a temporary reprieve in July as the global markets rallied sharply. This rather short-lived change in market sentiment was based mostly on the assumption that the central banks’ actions would help control inflationary pressures. We then saw losses over the rest of the quarter, primarily due to concerns that additional aggressive measures would be taken by the central banks.”
“As we head toward year-end,” Zaphiratos continued, “we are facing various headwinds: the emergence of new COVID-19 variants, the fear of upcoming central bank interest rate hikes and quantitative tightening to combat high and persistent global inflation, and the implications of the Russo-Ukrainian War and US-China tensions. Economic uncertainty remains high and pension fund managers are preparing for ongoing market volatility as the weight of these pressures continues to be felt.”
DB pension plans’ foreign equities returned -1.1%, slightly behind the MSCI World Index, which returned -0.1%. Growth stocks significantly outperformed value stocks in July, but ended the quarter only slightly ahead (MSCI World Growth CAD +1.1% versus MSCI World Value CAD -1.2%). Within the MSCI World benchmark, weakness in the Communications (-7.3%) and Real Estate (-6.0%) sectors were offset by strength in the Consumer Discretionary (+6.8%) and Energy (+5.0 %) sectors. Pension plans with unhedged US dollar exposure benefitted from the rapid appreciation of the US dollar versus the other major trading currencies, driven by investors flocking to that safe haven option.
Canadian equities held by Canadian DB plans returned -1.2% over the quarter, slightly ahead of …
Full story available on Benzinga.com
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