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Morneau Shepell releases the results of its Performance Universe of Pension Managers' Pooled Funds

Oct 24, 2017

Pension funds post positive returns in the third quarter of 2017

TORONTO, Oct. 24, 2017 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the third quarter of 2017.

According to the report, in the third quarter of 2017, diversified pooled fund managers posted a median return of 0.9 per cent before management fees.

"In the third quarter, the Canadian and global stock markets posted positive returns. The recovery of the energy sector had a positive impact on the Canadian stock market during the quarter, where the S&P/TSX gained 3.7 per cent. For the second time this year, the rise in the Canadian dollar versus several foreign currencies had a negative impact on Canadian investors. In the last three quarters, emerging market equities outperformed other major global indices. The MSCI Emerging Markets Index returned 7.7 per cent in local currency (4.0 per cent C$), the U.S. equity market represented by the S&P 500 Index rose 4.5 per cent in local currency (0.5 per cent C$) and the international equity market represented by the MSCI EAFE returned 3.4 per cent in local currency (1.5 per cent C$). Following the increase in bond yields in the months of July and September, Canadian bonds closed the quarter with negative returns," said Jean Bergeron, partner responsible for the Morneau Shepell Asset & Risk Management consulting team.

"On a solvency bases, pension fund financial situation slightly improved in the third quarter, largely due to an interest rates increase during the months of July and September. The solvency liability for a pension plan with an average duration barely changed during the quarter, while the median return on assets was 0.9 per cent," added Bergeron.

On average, during the third quarter of 2017, diversified pooled fund managers outperformed the benchmark. In fact, the median return (0.9 per cent) for these managers was 0.8 per cent higher than the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) return (0.1 per cent) used by many pension funds. Since the beginning of the year, the median pension fund return was 4.6 per cent, which is 0.3 per cent higher than the benchmark portfolio.

Canadian bonds
In the third quarter of 2017, managers obtained a median return of negative 1.7 per cent on bonds (Universe mandate), which was 0.1 higher than the benchmark.

During the same period, long-term bonds posted a return of negative 4.1 per cent, while the return for medium-term bonds was negative 1.8 per cent and for short-term bonds negative 0.5 per cent. High-yield bonds posted 2.3 per cent, while real return bonds provided a negative -3.0 per cent return. Since the beginning of 2017, managers obtained a median return of 0.8 per cent on bonds (Universe mandate) which was 0.3 per cent above the benchmark.

Canadian equities
In the third quarter of 2017, the median return for Canadian equity managers was 3.3 per cent, which is 0.4 per cent lower than the 3.7 per cent achieved by the S&P/TSX Index.

During the same period, the S&P/TSX Small Cap Index increased by 2.4 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks rose by 2.8 per cent, and the large-cap S&P/TSX 60 Index was up 4.0 per cent.

Foreign equities
Foreign equity managers' median returns and appropriate benchmark indices for the third quarter of 2017 are as follows:

  • 0.2 per cent for U.S. equities versus 0.5 per cent for the S&P 500 Index (C$);
  • 1.6 per cent for international equities versus 1.5 per cent for the MSCI EAFE Index (C$);
  • 1.0 per cent for global equities equal to the MSCI World Index (C$);
  • 3.7 per cent for emerging markets equities versus 4.0 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments
The Dow Jones Credit Suisse Hedge Fund Index (formerly CSFB/Tremont Hedge Fund Index) posted a return of negative 2.1 per cent (C$) for the third quarter of 2017.

The Performance Universe covers about 320 pooled funds managed by nearly 50 investment management firms. The pooled funds included in the Universe have a market value of more than $243 billion.

The results of Morneau Shepell's study are based on the returns provided by leading portfolio managers, ranging from independent investment management firms to insurance companies, trust companies and financial institutions. The returns are calculated before deduction of management fees.

The quarterly Performance Universe results are produced by the Asset & Risk Management consulting team at Morneau Shepell. This team provides independent consulting services on all aspects of asset and liability management of pension funds, endowment funds, and other institutional investment funds.

About Morneau Shepell
Morneau Shepell is the only human resources consulting and technology company that takes an integrated approach to employee assistance, health, benefits and retirement needs. The Company is the leading provider of employee and family assistance programs, the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. As a leader in strategic HR consulting and innovative pension design, the Company helps clients solve complex workforce problems and provides integrated productivity, health and retirement solutions.  Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations. With more than 4,000 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.


Summary

Rates of return for periods ending September 30, 2017
(annualized returns beyond one year)

Diversified












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


2.91

4.12

9.56

12.91

11.18

9.19

11.38

12.50


1st quartile


1.60

2.46

6.39

8.42

9.21

7.26

9.53

10.15


Median


0.89

1.59

4.59

6.19

7.81

6.77

9.04

9.63


3rd quartile


0.54

1.13

3.69

4.78

7.32

6.02

8.56

9.17


95th percentile


-0.46

0.41

2.16

3.34

6.35

5.10

7.35

7.65


Benchmark*


0.10

1.19

4.30

4.08

7.42

6.13

8.32

7.94


Benchmark**


0.37

1.34

4.59

4.86

7.89

6.35

8.64

8.38













*     45% fixed income,55% equity


**   40% fixed income,60% equity


Returns compounded quarterly










Money market












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


0.28

0.52

0.78

1.03

1.16

1.58

1.61

1.20


1st quartile


0.26

0.48

0.74

0.98

1.03

1.08

1.12

1.11


Median


0.24

0.46

0.70

0.89

0.91

0.95

1.00

1.04


3rd quartile


0.19

0.33

0.55

0.70

0.81

0.84

0.91

0.92


95th percentile


-0.19

-0.40

0.28

0.08

0.63

0.71

0.78

0.84









Canadian bonds











3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


1.07

2.01

4.47

5.85

7.45

5.46

6.85

6.19


1st quartile


-1.38

-0.18

1.66

-0.61

3.31

3.87

4.90

3.73


Median


-1.69

-0.48

0.99

-2.25

2.33

3.27

4.14

3.20


3rd quartile


-1.83

-0.71

0.66

-2.93

1.97

2.90

3.78

2.92


95th percentile


-4.15

-0.98

0.36

-6.04

1.47

2.39

3.35

2.47







Canadian bonds (Universe mandate)









3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


-1.22

0.03

1.49

-0.11

3.04

3.53

4.44

3.59


1st quartile


-1.58

-0.43

0.99

-2.11

2.24

3.23

4.13

3.20


Median


-1.71

-0.64

0.80

-2.34

2.05

3.04

3.97

3.02


3rd quartile


-1.81

-0.79

0.59

-2.85

1.82

2.85

3.75

2.83


95th percentile


-1.92

-1.00

0.42

-3.24

1.49

2.61

3.58

2.53
















 



Canadian equity – Broad*










3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


6.41

3.72

6.97

15.17

15.86

8.06

11.78

13.40


1st quartile


4.56

2.97

5.45

11.59

12.54

7.09

10.42

11.36


Median


3.30

2.36

4.57

9.28

11.57

5.70

9.57

10.47


3rd quartile


2.68

1.75

3.78

7.98

10.09

4.51

8.12

9.10


95th percentile


1.29

0.73

1.60

5.29

8.74

3.33

6.90

7.24


S&P/TSX


3.68

1.99

4.45

9.18

11.67

4.54

8.29

8.06


S&P/TSX Capped


3.68

1.99

4.45

9.18

11.67

4.54

8.29

8.06


*     Some funds may include up to 30% in foreign content








Canadian equity - Specialized










3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


4.23

3.14

5.58

12.28

18.03

11.40

14.64

16.60


1st quartile


3.82

1.57

0.49

8.48

13.76

3.48

8.76

11.28


Median


1.95

-1.69

-0.13

2.74

11.59

3.22

7.55

10.06


3rd quartile


0.16

-2.56

-2.89

-0.86

8.93

1.35

7.33

8.98


95th percentile


-1.68

-4.56

-7.52

-5.20

7.18

-0.06

3.60

5.44


S&P/TSX Small Cap


2.36

-3.28

-1.86

1.21

17.23

2.45

5.31

3.94


BMO Small Cap weighted


2.20

-2.14

1.04

4.10

17.08

3.05

5.98

4.66










U.S. equity












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


3.85

6.43

13.51

21.43

13.91

18.04

20.37

22.95


1st quartile


1.35

2.06

8.58

13.75

12.63

15.62

18.92

20.53


Median


0.17

1.18

5.82

12.14

11.19

14.32

17.25

19.04


3rd quartile


-0.76

-0.95

4.44

10.05

9.70

12.94

16.37

18.34


95th percentile


-2.26

-3.28

-2.03

5.51

8.01

10.58

14.74

17.00


S&P 500 (C$)


0.48

1.07

6.18

12.85

13.15

14.88

18.52

19.80













 


International equity (Europe and Asia)









3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


3.68

10.28

19.27

18.56

13.30

16.20

15.07

17.87


1st quartile


2.21

7.79

15.53

15.54

11.39

11.53

12.92

15.45


Median


1.57

6.52

14.59

14.03

9.70

10.37

10.97

14.07


3rd quartile


1.10

4.75

11.81

11.96

8.61

9.07

9.94

13.51


95th percentile


-0.25

3.51

8.23

9.62

7.01

7.82

9.41

11.93


MSCI EAFE (C$)


1.51

4.90

11.88

13.35

8.79

9.05

10.11

13.71







Global equity (U.S.A., Europe and Asia)









3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


3.85

8.39

16.93

19.88

14.71

17.13

17.90

21.22


1st quartile


2.08

5.64

13.45

16.22

13.33

14.10

15.68

17.76


Median


1.03

3.61

10.05

13.07

11.89

12.50

14.54

16.45


3rd quartile


0.34

2.07

7.52

9.74

10.12

11.53

13.44

15.85


95th percentile


-1.80

-0.66

4.35

6.16

8.94

9.26

10.73

13.57


MSCI World (C$)


0.96

2.27

8.19

12.45

10.79

11.81

14.27

16.45










Emerging markets












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


6.88

11.92

26.13

24.81

22.84

14.78

14.90

13.47


1st quartile


5.30

10.30

23.39

20.93

19.74

12.62

13.59

12.67


Median


3.69

8.23

20.84

16.59

17.13

11.23

11.68

10.84


3rd quartile


1.10

4.19

14.91

12.35

13.24

8.42

10.54

9.49


95th percentile


-1.09

0.60

9.89

5.44

10.34

6.94

8.03

6.45


MSCI Emerging markets


4.04

7.78

19.50

16.96

15.92

9.31

10.41

9.48

























 

The information herein has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does Morneau Shepell Asset & Risk Management Ltd. ("MS ARM") or its affiliates ("Morneau Shepell") assume any responsibility or liability. MS ARM or Morneau Shepell is not liable for any errors or omissions in the information or for any loss or damage suffered. Where such statements are based in whole or in part on information provided by third parties, they are not guaranteed to be accurate or complete. The information does not provide individual financial, legal, tax or investment advice and is for information purposes only.

SOURCE Morneau Shepell - Pension/Retirement

For further information: Heather MacDonald, Manager, Corporate Communications, 416.390.2625, hmacdonald@morneaushepell.com; Jean Bergeron, FSA, FCIA, CFA, Partner, 514.392.7852, jbergeron@morneaushepell.com


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