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

Negative returns for pension funds in 2018

TORONTO, Jan. 25, 2019 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the fourth quarter of 2018.

According to the report, in the fourth quarter of 2018, diversified pooled fund managers posted a median return of negative 5.6 per cent before management fees. For 2018 as a whole, their median return was negative 2.7 per cent.

"The bond market posted a positive return of 1.4 per cent for 2018. The Canadian equity S&P/TSX composite index posted a return of negative 8.9 per cent and the U.S. equity S&P 500 index a return of  negative 4.4 per cent (in U.S. dollars). This lacklustre performance was offset by the depreciation of the Canadian dollar, which upped the return in Canadian dollars to 4.0 per cent. The MSCI World index obtained a return of negative 0.5 per cent and the emerging markets index posted a return of negative 6.5 per cent (both in Canadian dollars)," said Jean Bergeron, vice-president responsible for the Morneau Shepell Asset & Risk Management consulting team.

"Pension fund solvency liability was up slightly, remaining relatively stable compared to the beginning of 2018. However, given the negative returns, pension fund financial positions on a solvency basis have deteriorated. The solvency ratio for an average pension plan has fallen by about 2.0 to 3.5 per cent since the beginning of the year," added Bergeron.

In 2018, the return produced by diversified pooled fund managers was, on average, lower than that of the benchmark portfolio. In effect, the managers' median return of negative 2.7 per cent was 0.4 per cent under 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 fourth quarter of 2018, managers obtained a median return of 1.6 per cent on bonds (Universe mandate), which was 0.2 per cent under the benchmark index. Since the beginning of 2018, managers obtained a median return of 1.5 per cent on bonds (Universe mandate), which was 0.1 per cent above the benchmark index.

In 2018, long-term bond index posted a return of 0.3 per cent, while mid-term and short-term bond indices returned 1.9 per cent. High-yield bond index posted 2.1 per cent, while real return bond index provided a 0.0 per cent return.

Canadian equities

In the fourth quarter of 2018, the median return for Canadian equity managers was negative 9.8 per cent, which is 0.3 per cent higher than the negative 10.1 per cent posted by the S&P/TSX Index.

Since the beginning of 2018, managers obtained a median return, which was 0.5 per cent above the S&P/TSX benchmark index.

For the year 2018, the S&P/TSX Small Cap Index lost 18.2 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks registered a decrease of 12.9 per cent, and the large-cap S&P/TSX 60 Index was down by 7.6 per cent.

Foreign equities

Foreign equity managers' median returns and appropriate benchmark indices for 2018 as a whole are as follows:

  • 5.4 per cent for U.S. equities versus 4.0 per cent for the S&P 500 Index (C$);
  • Negative 7.4 per cent for international equities versus negative 6.0 per cent for the MSCI EAFE Index (C$);
  • Negative 1.7 per cent for global equities versus negative 0.5 per cent for the MSCI World Index (C$);
  • Negative 6.9 per cent for emerging markets equities versus negative 6.5 per cent for the MSCI Emerging Markets Index (C$).

 

Alternative investments

The Dow Jones Credit Suisse Hedge Fund Index (formerly CSFB/Tremont Hedge Fund Index) posted a return of 0.9 per cent (C$) for the fourth quarter of 2018 and 5.3 per cent (C$) for the whole year of 2018.

The Performance Universe covers about 328 pooled funds managed by nearly 51 investment management firms. The pooled funds included in the Universe have a market value of more than $278 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 well-being, health, benefits and retirement needs. The Company is the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. LifeWorks by Morneau Shepell is a total well-being solution that combines employee assistance, wellness, recognition and incentive programs. As a leader in strategic HR consulting and innovative pension design, the Company also helps clients solve complex workforce problems and provides integrated productivity, health and retirement solutions. Established in 1966, Morneau Shepell serves approximately 24,000 clients, ranging from small businesses to some of the largest corporations and associations. With more than 4,500 employees in offices worldwide, Morneau Shepell provides services to organizations 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, 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

 

-3.53

-2.92

-0.14

0.40

5.72

6.52

6.96

8.29

 

1st quartile

 

-4.62

-3.91

-0.89

-1.50

3.76

5.32

5.35

6.54

 

Median

 

-5.56

-5.02

-2.18

-2.69

2.76

4.49

4.56

5.67

 

3rd quartile

 

-6.26

-6.05

-3.40

-3.89

1.99

4.02

4.15

5.38

 

95th percentile

 

-8.25

-8.09

-5.08

-6.17

0.50

2.96

3.42

4.69

 

Benchmark*

 

-4.14

-4.35

-1.59

-2.27

3.17

4.69

4.46

5.99

 

Benchmark**

 

-4.68

-4.77

-1.83

-2.58

3.19

4.87

4.60

6.09

                   
 

*     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

 

1.31

1.42

1.78

2.07

1.59

1.49

1.63

1.63

 

1st quartile

 

0.51

0.97

1.42

1.78

1.40

1.27

1.23

1.20

 

Median

 

0.49

0.93

1.35

1.69

1.33

1.21

1.16

1.13

 

3rd quartile

 

0.48

0.87

1.23

1.56

1.24

1.12

1.07

1.06

 

95th percentile

 

0.33

0.74

1.06

1.40

1.10

0.94

0.89

0.91

             

Canadian bonds

           
             
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

1.98

1.37

1.84

2.19

3.71

5.66

4.11

6.13

 

1st quartile

 

1.74

0.87

1.41

1.59

2.65

3.13

3.27

4.24

 

Median

 

1.44

0.57

1.15

1.33

2.21

2.33

2.62

3.84

 

3rd quartile

 

0.79

-0.18

0.57

0.50

1.94

2.10

2.41

3.61

 

95th percentile

 

-1.32

-1.80

-1.33

-0.54

1.58

1.61

2.12

2.62

       

Canadian bonds (Universe mandate)

     
       
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

2.10

1.18

1.76

2.21

2.55

2.73

3.01

4.15

 

1st quartile

 

1.76

0.91

1.45

1.65

2.32

2.34

2.62

3.91

 

Median

 

1.63

0.79

1.38

1.49

2.15

2.20

2.48

3.73

 

3rd quartile

 

1.39

0.56

1.10

1.25

1.97

2.07

2.38

3.57

 

95th percentile

 

0.19

0.01

0.55

0.34

1.72

1.82

2.24

3.48

 
 

Rates of return for periods ending December 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

 

-6.60

-5.95

-0.78

-5.08

2.22

8.29

5.05

6.94

 

1st quartile

 

-8.48

-8.38

-2.87

-6.60

1.14

6.69

4.13

5.71

 

Median

 

-9.76

-9.83

-4.84

-8.35

0.21

5.93

3.22

4.88

 

3rd quartile

 

-11.12

-11.04

-5.94

-9.97

-1.07

5.13

2.46

3.91

 

95th percentile

 

-14.10

-15.18

-9.65

-12.43

-2.70

3.96

1.13

2.31

 

S&P/TSX

 

-10.11

-10.62

-4.57

-8.89

-0.30

6.37

2.49

4.06

 

S&P/TSX Capped

 

-10.11

-10.62

-4.57

-8.89

-0.30

6.37

2.49

4.06

 

*     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

 

-10.24

-6.82

-3.02

-3.89

1.62

6.78

7.31

9.46

 

1st quartile

 

-13.77

-13.02

-10.95

-12.89

-2.11

5.53

4.60

4.44

 

Median

 

-15.89

-15.93

-12.85

-15.92

-4.53

2.26

0.58

2.28

 

3rd quartile

 

-16.71

-18.08

-14.05

-19.29

-9.45

-0.05

-0.90

1.01

 

95th percentile

 

-18.56

-22.02

-17.59

-23.94

-12.63

-0.98

-3.53

-2.88

 

S&P/TSX Small Cap

 

-14.38

-16.79

-11.31

-18.17

-8.30

5.20

0.23

-0.29

 

BMO Small Cap weighted

 

-15.23

-16.20

-11.29

-18.17

-6.70

5.63

0.41

0.31

               

U.S. equity

             
               
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

-3.89

2.70

7.94

10.74

14.94

12.34

14.61

16.89

 

1st quartile

 

-6.03

0.00

5.60

9.30

11.45

10.53

11.93

14.39

 

Median

 

-7.53

-2.64

3.26

5.43

8.96

8.05

10.86

13.14

 

3rd quartile

 

-9.24

-4.74

-0.12

3.15

7.12

7.08

9.95

11.65

 

95th percentile

 

-13.68

-11.62

-6.48

-5.39

3.68

4.80

8.33

10.73

 

S&P 500 (C$)

 

-8.86

-3.50

1.93

3.97

8.79

8.73

11.67

14.03

                     
                     

Rates of return for periods ending December 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

 

-4.89

-4.02

-2.79

-1.66

10.88

7.60

11.14

9.91

 

1st quartile

 

-6.39

-6.43

-5.09

-3.49

6.65

4.11

7.86

7.51

 

Median

 

-8.18

-8.23

-8.29

-7.43

4.91

2.57

6.68

6.20

 

3rd quartile

 

-9.51

-10.48

-10.43

-9.53

3.90

1.88

5.86

5.64

 

95th percentile

 

-12.27

-14.22

-14.31

-14.00

2.71

0.86

4.63

4.58

 

MSCI EAFE (C$)

 

-7.58

-7.96

-7.25

-6.03

4.78

2.29

6.23

5.71

       

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

 

-2.98

-0.70

3.58

6.03

14.00

9.83

13.01

13.28

 

1st quartile

 

-6.36

-3.14

-0.39

1.49

9.05

7.60

10.70

11.05

 

Median

 

-8.30

-5.63

-2.99

-1.73

6.51

6.28

9.07

9.99

 

3rd quartile

 

-9.87

-7.77

-6.15

-4.60

4.55

5.25

7.89

8.68

 

95th percentile

 

-12.53

-12.45

-12.02

-10.39

2.80

2.81

6.03

6.59

 

MSCI World (C$)

 

-8.51

-5.62

-2.04

-0.49

6.68

5.71

8.86

9.94

             

Emerging markets

           
             
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

2.54

1.20

-4.27

-1.66

11.67

11.69

10.29

10.38

 

1st quartile

 

-0.50

-2.20

-7.44

-4.61

11.17

9.84

9.22

9.35

 

Median

 

-2.94

-5.38

-10.09

-6.91

9.96

9.29

8.47

8.11

 

3rd quartile

 

-3.52

-7.25

-12.93

-8.83

7.80

8.13

7.08

7.33

 

95th percentile

 

-5.16

-8.32

-14.57

-11.41

5.00

6.22

5.61

5.73

 

MSCI Emerging markets

 

-2.16

-4.77

-10.47

-6.52

9.69

9.03

7.34

7.28

 

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 fourth 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, Vice President, 514.392.7852, jbergeron@morneaushepell.com