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

Apr 26, 2018

Pension funds post negative first-quarter returns

TORONTO, April 26, 2018 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the first quarter of 2018.

According to the report, in the first quarter of 2018, diversified pooled fund managers posted a median return of negative 0.7 per cent before management fees.

"After hitting record levels in 2017, the major stock markets posted negative returns in local currency, mainly due to uncertainty and concerns about monetary policy and global trade. The Canadian stock market had a poor first quarter, returning negative 4.5 per cent. U.S. equities underperformed, but aided by the exchange rate the S&P 500 posted a return of 2.0 per cent in Canadian dollars. Emerging market equities outperformed all others, with the MSCI Emerging Markets Index returning 4.4 per cent in Canadian dollars. Bond returns were modest in the first quarter, at about 0.1 per cent for the market as a whole," said Jean Bergeron, partner responsible for the Morneau Shepell Asset & Risk Management consulting team.

The decrease in liabilities was greater than the negative asset returns, leading to improved pension fund financial positions on a solvency basis in the first quarter of 2018. "The solvency ratio for an average pension plan improved by about 0.3 to 1.0 per cent during the year," added Bergeron.

On average, during the first quarter of 2018, diversified pooled fund managers obtained a median return of (negative 0.7 per cent),which was equal to the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) used by many pension funds.

Canadian bonds
In the first quarter of 2018, managers obtained a median return of 0.2 per cent on bonds (Universe mandate), which was 0.1 per cent higher than the benchmark index.

Since the beginning of 2018, long-term bonds posted a return of 0.0 per cent, while the return for medium-term bonds was 0.0 per cent and for short-term bonds 0.2 per cent. High-yield bonds posted 1.5 per cent, while real return bonds provided a 1.4 per cent return.

Canadian equities
In the first quarter of 2018, the median return for Canadian equity managers was negative 3.7 per cent, which is 0.8 per cent higher than the negative 4.5 per cent achieved by the S&P/TSX Index.

Since the beginning of 2018, the S&P/TSX Small Cap Index fell by 7.7 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks registered a decrease of 4.5 per cent, and the large-cap S&P/TSX 60 Index dropped by 4.6 per cent.

Foreign equities
Foreign equity managers' median returns and appropriate benchmark indices in the first quarter of 2018 are as follows:

  • 2.3 per cent for U.S. equities versus 2.0 per cent for the S&P 500 Index (C$);
  • 1.3 per cent for international equities versus 1.3 per cent for the MSCI EAFE Index (C$);
  • 1.6 per cent for global equities versus 1.6 per cent for the MSCI World Index (C$);
  • 4.3 per cent for emerging markets equities versus 4.4 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments
The Dow Jones Credit Suisse Hedge Fund Index (formerly CSFB/Tremont Hedge Fund Index) posted a return of 3.3 per cent (C$) for the first quarter of 2018.

The Performance Universe covers about 334 pooled funds managed by nearly 51 investment management firms. The pooled funds included in the Universe have a market value of more than $257 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 Inc.

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 March 31, 2018
(annualized returns beyond one year)


Diversified




3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


0.56

5.28

6.78

8.23

11.01

6.74

9.11

11.52


1st quartile


-0.14

3.78

5.17

6.28

9.17

5.66

7.35

9.21


Median


-0.70

3.44

4.50

5.06

8.11

4.93

6.86

8.73


3rd quartile


-1.17

2.34

3.09

3.85

7.09

4.63

6.29

8.37


95th percentile


-2.20

0.34

1.76

1.21

5.92

3.82

5.05

6.51


Benchmark*


-0.69

3.69

3.79

4.93

7.83

4.38

6.73

7.63


Benchmark**


-0.76

3.70

4.08

5.08

8.32

4.62

6.90

7.98













*     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


0.40

0.81

1.01

1.26

1.31

1.15

1.65

1.18


1st quartile


0.36

0.71

0.96

1.17

1.09

1.07

1.12

1.11


Median


0.34

0.68

0.90

1.12

1.02

0.95

1.04

1.06


3rd quartile


0.32

0.63

0.83

0.91

0.84

0.87

0.95

0.94


95th percentile


0.25

0.58

0.53

0.37

0.74

0.73

0.80

0.85












Canadian bonds




3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


0.47

5.36

2.10

5.32

7.18

4.29

6.37

5.54


1st quartile


0.30

2.44

1.01

2.58

3.43

2.29

4.15

3.87


Median


0.16

2.18

0.69

1.80

2.15

1.74

3.74

3.32


3rd quartile


0.07

1.93

0.37

1.38

1.74

1.47

3.46

3.01


95th percentile


-0.33

0.96

0.17

0.78

1.15

1.19

2.62

2.44












Canadian bonds (Universe mandate)








3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


0.45

2.61

1.30

2.26

2.67

2.18

4.07

3.63


1st quartile


0.25

2.30

0.70

1.84

2.16

1.77

3.77

3.34


Median


0.17

2.16

0.42

1.52

1.99

1.52

3.56

3.18


3rd quartile


0.11

2.00

0.30

1.26

1.67

1.41

3.43

2.98


95th percentile


-0.06

1.76

0.16

0.92

1.25

1.21

3.28

2.75

 

Rates of return for periods ending March 31, 2018
(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


-1.57

3.47

10.42

8.78

15.30

7.86

8.32

11.43


1st quartile


-3.08

1.58

5.44

3.86

11.23

6.17

6.78

9.60


Median


-3.71

0.21

3.73

2.73

9.68

4.97

6.19

8.99


3rd quartile


-4.32

-0.65

2.11

1.49

8.47

3.93

4.73

7.56


95th percentile


-6.11

-3.21

0.06

-1.56

6.47

2.84

3.40

5.78


S&P/TSX


-4.52

-0.27

3.40

1.71

9.84

4.07

4.78

6.93


S&P/TSX Capped


-4.52

-0.27

3.40

1.71

9.84

4.07

4.78

6.93


*     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


-0.40

6.67

9.99

6.81

14.97

11.43

11.02

16.77


1st quartile


-2.74

4.44

6.52

3.03

11.05

7.39

6.88

11.36


Median


-3.97

2.09

2.59

-1.08

8.88

3.74

4.14

9.16


3rd quartile


-7.57

-1.87

-0.36

-2.67

6.71

1.80

2.61

6.93


95th percentile


-8.03

-3.89

-2.49

-4.70

5.19

1.45

-1.06

4.49


S&P/TSX Small Cap


-7.73

-3.40

-1.12

-6.57

9.99

4.49

0.73

3.51


BMO Small Cap weighted


-7.75

-2.88

-0.75

-4.96

11.09

4.64

1.27

4.04












U.S. equity












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


7.68

14.76

17.18

19.32

23.42

14.73

17.94

22.02


1st quartile


3.08

11.98

12.11

14.00

16.80

11.45

15.68

19.07


Median


2.31

9.56

9.49

10.35

15.36

10.21

14.84

18.08


3rd quartile


1.28

7.52

7.98

8.23

12.42

8.83

13.52

16.92


95th percentile


0.07

6.06

5.35

4.62

10.90

8.00

11.83

14.68


S&P 500 (C$)


2.00

9.35

9.87

10.52

15.16

11.44

15.63

18.84

 

Rates of return for periods ending March 31, 2018
(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


3.69

10.03

12.81

21.21

18.05

12.55

13.16

15.60


1st quartile


2.17

7.56

10.44

17.11

15.03

9.25

10.60

13.78


Median


1.32

6.66

8.82

13.67

13.59

7.43

9.15

12.38


3rd quartile


0.83

5.08

6.53

10.80

12.37

6.15

7.93

11.55


95th percentile


-1.12

3.60

3.11

7.17

9.93

5.11

6.73

9.74


MSCI EAFE (C$)


1.32

5.80

7.39

10.98

13.04

6.18

8.01

11.69












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


4.91

13.26

16.13

21.50

19.77

14.39

15.30

19.61


1st quartile


2.76

9.63

11.90

15.61

17.15

10.93

13.42

16.47


Median


1.58

7.79

8.58

10.85

14.46

9.54

12.45

15.20


3rd quartile


0.79

6.45

6.16

7.99

11.80

8.18

11.38

14.11


95th percentile


-2.81

2.41

3.45

3.88

9.24

6.49

8.23

10.88


MSCI World (C$)


1.58

7.37

8.40

9.81

13.99

8.61

11.74

15.06












Emerging markets












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


5.98

14.43

20.76

26.45

27.33

14.19

15.84

14.29


1st quartile


5.28

13.00

18.99

24.66

25.43

13.27

13.91

12.28


Median


4.25

12.33

15.71

20.22

23.84

11.95

12.53

10.60


3rd quartile


1.90

10.03

13.05

15.87

17.36

8.87

10.81

9.11


95th percentile


0.49

5.17

5.06

7.28

12.01

7.47

7.97

6.90


MSCI Emerging markets


4.41

12.44

16.99

21.20

21.25

9.86

11.28

10.51

 

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, [email protected]; Jean Bergeron, FSA, FCIA, CFA, Partner, 514.392.7852, [email protected]


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