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

Pension funds obtain excellent returns in 2017

TORONTO, Jan. 24, 2018 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the fourth quarter of 2017.

According to the report, in the fourth quarter of 2017, diversified pooled fund managers posted a median return of 3.9 per cent before management fees. For 2017 as a whole, diversified pooled fund managers obtained a median return of 8.6 per cent.

"Stimulated by strong and synchronized global economic growth, stock markets rose to record levels in 2017. The Canadian stock market did not do as well as in 2016, but still grew 9.1 per cent. U.S. equities continued to perform well and the S&P 500 Index posted a 13.8 per cent return in Canadian dollars. Emerging market equities outperformed all others equity markets, with the MSCI Emerging Markets Index returning 28.7 per cent in Canadian dollars. Bond returns were modest in 2017, at about 3 per cent for the market as a whole," said Jean Bergeron, partner responsible for the Morneau Shepell Asset & Risk Management consulting team.

Given the strong market performance, pension fund financial positions on a solvency basis improved in 2017. "The solvency ratio for an average pension plan improved by 5 to 7 per cent during the year," added Bergeron.

On average, during the fourth quarter of 2017, diversified pooled fund managers underperformed the benchmark. In effect, the median return (3.9 per cent) for these managers was 0.5 per cent lower than the 4.4 per cent return of the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) used by many pension funds. Since the beginning of the year, the median pension fund return was 8.6 per cent, which is 0.3 per cent lower than the benchmark portfolio.

Canadian bonds
In the fourth quarter of 2017, managers obtained a median return of 2.0 per cent on bonds (Universe mandate), which was equal to the benchmark index.

Since the beginning of 2017, managers obtained a median return of 2.9 per cent on bonds (Universe mandate) which was 0.4 per cent above the benchmark index. For 2017, long-term bonds posted a return of 7.0 per cent, while the return for medium-term bonds was 1.0 per cent and for short-term bonds 0.1 per cent. High-yield bonds posted 9.9 per cent, while real return bonds provided a 0.7 per cent return.

Canadian equities
In the fourth quarter of 2017, the median return for Canadian equity managers was 4.4 per cent, which is 0.1 per cent lower than the 4.5 per cent achieved by the S&P/TSX Index. However, for 2017 as a whole, Canadian equity manager obtained a median return of 9.3 per cent, which is 0.2 percent higher than the S&P/TSX index return of 9.1 per cent.

For 2017, the S&P/TSX Small Cap Index increased by 2.8 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks rose by 7.0 per cent, and the large-cap S&P/TSX 60 Index was up 9.8 per cent.

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

  • 13.2 per cent for U.S. equities versus 13.8 per cent for the S&P 500 Index (C$);
  • 19.8 per cent for international equities versus 16.8 per cent for the MSCI EAFE Index (C$);
  • 17.1 per cent for global equities versus 14.4 per cent for the MSCI World Index (C$);
  • 30.4 per cent for emerging markets equities versus 28.7 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments
The Dow Jones Credit Suisse Hedge Fund Index (formerly CSFB/Tremont Hedge Fund Index) posted a return of 2.8 per cent (C$) for the fourth quarter of 2017 and 0.1 per cent (C$) for 2017.

The Performance Universe covers about 324 pooled funds managed by nearly 50 investment management firms. The pooled funds included in the Universe have a market value of more than $262 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 December 31, 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

5.46

8.15

9.38

14.16

13.24

9.24

10.63

12.63


1st quartile

4.20

5.73

6.90

10.73

10.40

7.97

8.76

10.40


Median

3.93

4.81

5.61

8.63

8.35

7.24

8.37

9.80


3rd quartile

3.48

4.43

4.79

7.15

7.65

6.70

7.60

9.36


95th percentile

2.56

2.96

3.30

5.65

6.05

5.72

6.68

8.04


Benchmark*

4.41

4.52

5.66

8.91

8.36

6.81

8.16

8.51


Benchmark**

4.49

4.88

5.89

9.29

8.81

7.11

8.38

8.94












*  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

0.46

0.62

0.87

1.18

1.24

1.49

1.57

1.20


1st quartile

0.35

0.60

0.82

1.09

1.03

1.08

1.12

1.11


Median

0.33

0.56

0.78

1.03

0.95

0.96

1.00

1.04


3rd quartile

0.29

0.46

0.60

0.83

0.87

0.88

0.91

0.93


95th percentile

0.27

0.28

0.07

0.63

0.69

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

5.34

1.65

5.23

7.34

8.04

5.48

7.79

5.85


1st quartile

2.26

0.90

2.13

3.97

4.12

3.83

5.00

4.07


Median

2.04

0.44

1.56

3.08

2.83

3.09

4.48

3.47


3rd quartile

1.71

0.24

1.15

2.56

2.42

2.71

4.17

3.21


95th percentile

0.70

-0.01

0.52

1.69

1.84

2.24

3.44

2.78










Canadian bonds (Universe mandate)








3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile

2.50

1.05

2.18

4.03

3.48

3.43

4.86

3.79


1st quartile

2.16

0.49

1.67

3.16

2.84

3.08

4.50

3.48


Median

2.03

0.30

1.41

2.92

2.63

2.81

4.34

3.33


3rd quartile

1.82

0.16

1.12

2.56

2.35

2.67

4.14

3.15


95th percentile

1.52

-0.03

0.70

2.22

1.98

2.46

3.94

2.85

 


Rates of return for periods ending December 31, 2017
(annualized returns beyond one year)










Canadian equity – Broad*











3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile

6.50

13.17

10.05

11.87

18.96

9.37

10.08

13.49


1st quartile

4.74

8.94

7.46

10.53

14.89

8.28

9.24

11.36


Median

4.38

7.81

6.80

9.31

13.68

7.49

8.46

10.76


3rd quartile

3.57

6.75

5.51

7.64

12.47

6.50

7.48

9.20


95th percentile

2.12

4.42

3.60

5.23

11.24

5.51

5.83

7.67


S&P/TSX

4.45

8.30

6.52

9.10

14.93

6.59

7.57

8.63


S&P/TSX Capped

4.45

8.30

6.52

9.10

14.93

6.59

7.57

8.63


* 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

9.24

12.55

10.20

13.10

19.55

12.97

12.86

17.58


1st quartile

8.23

10.18

7.03

9.41

15.54

8.00

8.64

12.34


Median

5.98

7.13

3.68

3.60

13.39

6.29

6.46

10.91


3rd quartile

5.50

6.23

2.58

0.94

10.06

5.16

5.66

8.98


95th percentile

3.33

5.18

2.13

-0.88

8.02

3.99

2.30

6.74


S&P/TSX Small Cap

4.69

7.17

1.26

2.75

19.29

7.24

4.76

5.32


BMO Small Cap weighted

5.28

7.59

3.03

6.38

20.01

7.50

5.55

5.99











U.S. equity











3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile

9.15

10.75

12.76

21.30

15.04

16.28

18.70

24.22


1st quartile

7.62

8.93

9.69

15.49

11.60

13.97

16.38

21.09


Median

6.72

7.11

8.24

13.21

10.31

12.98

15.37

20.26


3rd quartile

6.11

5.53

5.38

11.47

8.27

12.11

14.27

19.74


95th percentile

4.00

3.88

2.89

7.70

6.59

9.82

13.24

18.37


S&P 500 (C$)

7.20

7.71

8.35

13.83

11.19

14.36

16.69

21.29

 

Rates of return for periods ending December 31, 2017
(annualized returns beyond one year)









International equity (Europe and Asia)










3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile

6.83

11.16

18.96

28.10

14.00

17.49

14.07

16.91


1st quartile

5.34

8.67

14.48

23.30

10.00

13.47

11.17

14.46


Median

4.65

6.26

11.30

19.83

8.46

11.55

9.96

13.48


3rd quartile

3.99

5.47

9.35

16.56

6.66

10.39

8.55

12.66


95th percentile

3.10

3.53

6.65

12.03

4.74

9.52

7.83

11.44


MSCI EAFE (C$)

4.42

5.99

9.53

16.82

6.73

10.66

8.87

12.97











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

8.55

12.05

16.47

26.75

14.51

18.61

16.70

20.79


1st quartile

6.78

9.34

13.27

21.11

12.69

13.98

14.57

18.44


Median

6.09

7.50

9.47

17.14

10.38

12.98

13.06

16.85


3rd quartile

5.13

6.16

7.62

12.84

8.57

11.92

12.21

16.20


95th percentile

4.37

3.73

5.79

10.95

7.06

9.79

9.80

13.34


MSCI World (C$)

5.70

6.71

8.10

14.36

8.95

12.16

12.72

16.89











Emerging markets











3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile

8.65

15.64

21.08

36.46

23.98

17.37

15.77

13.61


1st quartile

8.09

13.33

18.49

33.14

20.49

15.60

13.90

12.45


Median

7.69

12.03

16.41

30.35

18.49

14.19

12.26

10.93


3rd quartile

7.21

8.15

11.54

23.40

14.34

10.61

11.20

9.40


95th percentile

4.64

4.54

6.36

16.25

11.86

9.53

8.17

6.39


MSCI Emerging markets

7.70

12.05

16.08

28.70

17.76

12.41

11.04

9.65

 

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 Inc.

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