CANADA - A softer Canadian dollar prevented local pension funds being harder hit by falling global equity markets, according to RBC Dexia.
Don McDougall, director of advisory services, RBC Dexia, said: "The MSCI World Index plunged 11.9% in local currency terms. Performance nearly matched the index, but Canadian pensions lost only 5.5% exchange rates are taken into account."
In line with global trends, the domestic stock market fell 2.8% over the quarter but better commodities prices should have acted to rebalance losses.
McDougall continued: "Unfortunately, Canadian pensions had generally reined in their exposure to both growth sectors and underperformed the S&P TSX Composite Index by 1.6% this quarter - and by 3.8% over the year."
Domestic bonds were the biggest winners for pension funds, earning 2.8% across the quarter.
Over 2007, a strong Canadian dollar hurt pension funds. Year-on-year, the currency appreciated by more than 12% against a basket of world currencies, including 16% against the US Dollar, 15% against the British Pound and 9% against the Japanese Yen.
McDougall said at the beginning of 2008, over the previous year the dollar had stopped most pension plans benefiting from rises in global equity markets.
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