Pension Plans Report 1.6% Return in Q4, 11.3% for the Year at RBC Investor Services
RBC Investor Services (RBCIS) has reported a positive performance for its defined benefit (DB) pension plan clients, marking a median return of 1.6% for the fourth quarter of 2024. This return culminates in an impressive 11.3% median return for the entire year, making 2024 the strongest year for RBCIS’ DB pension plans in five years. The analysis covers a broad range of RBCIS client plans across both the private and public sectors.
“We are thrilled to report our fourth consecutive positive quarter for RBCIS DB client plans,” said Isabelle Tremblay, Asset Owner Segment Lead at RBC Investor Services. “This is driven by strong returns in the equity markets, which helped push us to solid growth for the year.”
Performance Breakdown
Global equities, a significant contributor to the overall strong performance, saw a return of 4.1% for RBCIS DB pension plans in the fourth quarter of 2024. This was largely driven by the performance of U.S. equities, which benefited from a favorable currency move as the Canadian dollar depreciated against the U.S. dollar. The MSCI World Index, which tracks a broad spectrum of global equities, posted a return of 6.3% in Q4 2024. Notably, the sectors that performed the best during this period were Consumer Discretionary (up 15.7%), Communication Services (up 13.6%), and Information Technology (up 11.4%).
Over the past year, global equities generated a robust 24.1% return for RBCIS DB pension plans, though this was slightly under the MSCI World Index’s 29.4% return. Among the top-performing sectors for the year were Communication Services (46.0%), Information Technology (45.0%), and Financials (38.2%). These strong returns highlight the continued strength of global equity markets, particularly in the tech and communication sectors, which have benefitted from ongoing digitalization trends.
On the other hand, Canadian equities underperformed their global counterparts. This was partly due to RBCIS DB pension plans’ relatively lower exposure to growth-style stocks, which have dominated global performance in recent years. Canadian equities posted a quarterly return of 3.2% and a yearly return of 21.2%, which closely matched the TSX Composite Index’s performance of 3.8% in Q4 and 21.7% for the year. Within the Canadian market, Information Technology (up 22.2% quarterly and 38.0% annually), Financials (up 6.6% quarterly and 30.1% annually), and Energy (up 6.6% quarterly and 24.0% annually) were the top-performing sectors.
Canadian Fixed Income Market
In terms of fixed income investments, RBCIS DB pension plans experienced a slight decline of -0.2% for the quarter. However, the performance for the full year was positive, with a return of 3.6%, which was in line with the FTSE Canada Universe Bond Index’s performance of -0.04% for Q4 and 4.2% for the year. This return was influenced by the Bank of Canada’s substantial interest rate reductions, which had an outsized impact on long-term bond yields.
Over the year, the FTSE Canada Short Term Bond Index outperformed its long-term counterpart. The Short Term Bond Index posted a return of 5.7%, compared to the 1.4% return of the FTSE Canada Long Term Bond Index. This outperformance is consistent with the broader market’s response to lower interest rates, which tend to benefit shorter-duration bonds more than longer-duration ones.
About RBC Investor Services
RBC Investor Services is a division of Royal Bank of Canada, offering investment servicing solutions to Canadian asset managers, asset owners, insurance providers, investment counselors, and global financial institutions. The company prides itself on safeguarding its clients’ assets and helping them achieve long-term growth. With over 1,500 employees spread across the globe, RBC Investor Services has over C$2.6 trillion in assets under administration. The firm is committed to providing tailored solutions that support its clients’ goals and respond to the evolving needs of the financial market.
About RBC
Royal Bank of Canada is one of the largest banks globally, with a diverse business model and a focus on innovation. With more than 98,000 employees, RBC serves over 18 million clients across Canada, the U.S., and 27 other countries. RBC is committed to supporting community initiatives through donations, volunteer activities, and investments in programs aimed at building a sustainable future.
