Plan sponsors are asking harder questions about what is inside their portfolios, says RBC
Canadian defined benefit (DB) pension plans gained 6.0 per cent in the second quarter of 2026, marking the first time since Q3 2025 that both equities and fixed income delivered positive returns simultaneously, according to a press release from RBC Investor Services.
"This quarter was a stress test for the diversification assumptions built into most investment policies," said Isabelle Tremblay, director of client solutions, and asset owner segment lead at RBC Investor Services in a statement. "What we're seeing from plan sponsors is a growing interest in understanding their AI exposure, not just their asset class breakdown."
Year-to-date, the median return across plans in RBC Investor Services' custody stands at 6.4 per cent.
Global equities drove the bulk of the gain, returning 15.1 per cent for the quarter and 14.0 per cent year-to-date. Emerging markets were among the top winner as the MSCI Emerging Markets Index returned 26.1 per cent in Q2 and 28.2 per cent year-to-date in Canadian dollar terms, propelled by semiconductor heavyweights in Korea and Taiwan.
Among developed markets, US equities led with the S&P 500 returning 17.1 per cent for the quarter in Canadian dollar terms. Information technology, now 38.0 per cent of the index, rose 34.0 per cent, with the semiconductors sub-sector alone gaining 52.2 per cent.
Geopolitical shock splits Canadian equity sectors
Closer to home, a weakening Canadian dollar - one US dollar bought C$1.4188 at quarter-end - amplified returns for plans with unhedged exposure. Canadian equities returned 7.0 per cent for the quarter and 11.2 per cent year-to-date, broadly tracking the S&P/TSX Composite, but the headline figure masked sharp divergence underneath.
The US-Iran military conflict was the dominant macro factor shaping sector returns. Oil prices spiked on the initial escalation but retreated as tensions eased, leaving energy down 5.0 per cent for the quarter. Inflation fears triggered by the oil spike prompted markets to price in tighter monetary policy, and materials fell 11.5% as gold and silver sold off. Financials were the counterweight, rising 25.6 per cent and - at 36.2 per cent of the index - accounting for the bulk of the quarterly gain.
Fixed income outperforms benchmark as rate path stays uncertain
Fixed income posted gains across all maturities, with plans returning 3.0 per cent for the quarter and 3.2 per cent year-to-date, ahead of the FTSE Canada Universe Bond Index at 2.0 per cent and 2.2 per cent respectively. Longer-duration bonds led as long-term yields declined. The Bank of Canada held its policy rate at 2.25 per cent through the quarter.
"With rates at the lower end of the neutral range and the outlook subject to two-sided risks, the interest rate sensitivity of both plan assets and liabilities remains a key consideration for sponsors," RBC said in the release.
