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

A third-quarter reversal for pension funds in 2020

TORONTO, Oct. 22, 2020 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the third quarter of 2020.

According to the report, in the third quarter of 2020, diversified pooled fund managers posted a median return of 4.4 per cent before management fees and 2.6 per cent since the beginning of the year.

"The stock market rebound continued into the third quarter, most market indices showed positive returns. The MSCI World Index delivered a 5.9 per cent return for the third quarter. During the third quarter, the bond market posted a positive return of 0.4 per cent, the Canadian Equity S&P/TSX Composite Index posted a return of 4.7 per cent and the U.S. stock S&P 500 Index registered a return of 8.9 per cent (in U.S. dollars) and a 6.6 per cent return in Canadian dollars. The Emerging Markets Index posted a return of 7.6 per cent (in Canadian dollars)," said Jean Bergeron, Partner for the Morneau Shepell Asset & Risk Management consulting team.

"The good returns obtained in the third quarter enabled pension funds to improve their financial position. However, the financial situation of the pension funds remained worse than it was at the start of the year due to the significant drop in interest rates. This drop in interest rates has caused solvency liabilities to rise significantly since the beginning of the year. We estimate that the solvency ratio of an average pension fund has fallen by around 1.0 per cent to 5.0 per cent since the beginning of the year," added Bergeron.

During the third quarter of 2020, diversified pooled fund managers obtained a median return of 4.4 per cent, which was 1.4 per cent higher than 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 third quarter of 2020, managers obtained a median return of positive 0.9 per cent on bonds (Universe mandate); the return was 0.5 per cent higher than the benchmark index.

During the third quarter of 2020, short-term, mid-term and long-term bond indices posted returns of 0.7 per cent, 1.1 per cent and negative 0.3 per cent respectively. The high-yield bond index posted a return of 4.6 per cent, while the real return bond index provided a 4.4 per cent return.

Canadian equities
In the third quarter of 2020, the median return for Canadian equity managers was 5.9 per cent, which was 1.2 per cent higher than the 4.7 per cent posted by the S&P/TSX Index.

During the third quarter of 2020, the S&P/TSX Small Cap Index gained 6.6 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks registered an increase of 6.1 per cent, and the large-cap S&P/TSX 60 Index grew by 4.4 per cent.

Foreign equities
Foreign equity managers' median returns and appropriate benchmark indices' returns for the third quarter of 2020 are as follows:

  • 6.6 per cent for U.S. equities versus 6.6 per cent for the S&P 500 Index (C$);
  • 4.9 per cent for international equities versus 2.8 per cent for the MSCI EAFE Index (C$);
  • 5.3 per cent for global equities versus 5.9 per cent for the MSCI World Index (C$);
  • 8.4 per cent for emerging market equities versus 7.6 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments
The Dow Jones Credit Suisse Hedge Fund Index (formerly CSFB/Tremont Hedge Fund Index) posted a return of 1.2 per cent (C$) for the third quarter of 2020.

The Performance Universe covers about 308 funds managed by nearly 47 investment management firms.

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 Asset & Risk Management consulting team at Morneau Shepell produces the quarterly Performance Universe results. 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 a leading provider of technology-enabled HR services that deliver an integrated approach to employee wellbeing through our cloud-based platform. Our focus is providing world-class solutions to our clients to support the mental, physical, social and financial wellbeing of their people. By improving lives, we improve business. Our approach spans services in employee and family assistance, health and wellness, recognition, pension and benefits administration, retirement consulting, actuarial and investment services. Morneau Shepell employs approximately 6,000 employees who work with some 24,000 client organizations that use our services in 162 countries. 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, 2020
(annualized returns beyond one year)

Diversified












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


7.75

21.42

9.43

12.84

9.61

9.44

9.30

9.46


1st quartile


4.96

16.58

6.00

8.90

8.18

7.62

7.16

7.66


Median


4.38

15.33

2.62

5.81

5.62

5.99

6.29

6.78


3rd quartile


3.69

14.21

0.47

3.66

3.49

4.31

5.05

6.11


95th percentile


2.73

10.95

-4.21

-2.16

0.87

2.55

3.78

4.96


Benchmark*


2.99

15.56

5.01

7.25

8.08

7.53

6.66

7.49


Benchmark**


3.26

16.22

4.56

7.11

7.82

7.48

6.82

7.64













*     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


0.88

3.60

5.09

5.39

4.77

3.57

2.68

2.60


1st quartile


0.16

0.48

0.91

1.38

1.72

1.68

1.50

1.41


Median


0.12

0.39

0.86

1.33

1.68

1.65

1.48

1.35


3rd quartile


0.10

0.32

0.76

1.25

1.63

1.57

1.41

1.29


95th percentile


0.04

0.22

0.51

0.99

1.43

1.45

1.30

1.20

Canadian bonds











3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


3.38

13.83

11.43

9.85

13.28

10.05

6.18

7.23


1st quartile


1.41

10.21

9.49

8.60

9.29

6.93

4.68

5.18


Median


0.98

8.30

8.60

7.96

8.87

6.49

4.27

4.81


3rd quartile


0.67

7.00

7.52

7.19

8.22

6.14

4.05

4.56


95th percentile


-0.13

5.49

1.73

3.16

4.97

3.82

3.14

3.06

Canadian bonds (Universe mandate)









3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


1.71

9.30

9.95

8.93

9.35

7.06

4.64

5.27


1st quartile


1.12

8.24

9.11

8.42

9.10

6.61

4.36

4.86


Median


0.85

7.31

8.62

7.91

8.86

6.49

4.19

4.67


3rd quartile


0.67

6.79

8.06

7.27

8.52

6.26

4.04

4.48


95th percentile


0.47

5.45

5.84

5.89

7.05

5.33

3.70

4.06
















 


Rates of return for periods ending September 30, 2020
(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


10.06

27.22

3.53

6.99

8.73

8.36

7.38

8.95


1st quartile


6.66

23.76

-0.82

2.26

3.98

5.49

6.23

7.52


Median


5.90

19.41

-3.93

-0.46

2.26

3.56

4.98

6.87


3rd quartile


4.63

16.18

-6.50

-4.12

-0.71

1.59

4.11

5.73


95th percentile


4.05

13.14

-13.38

-10.55

-3.81

-0.83

0.89

3.38


S&P/TSX


4.73

22.51

-3.09

-0.03

3.46

4.26

5.47

7.16


S&P/TSX Capped


4.73

22.51

-3.09

-0.03

3.46

4.26

5.47

7.16


*     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


15.20

58.87

13.49

21.10

10.30

10.41

9.04

11.29


1st quartile


12.42

49.38

7.20

17.07

8.22

8.39

7.75

9.80


Median


10.85

45.02

4.23

12.68

5.18

4.31

4.36

7.26


3rd quartile


9.59

41.08

2.98

10.58

1.60

1.63

0.82

5.14


95th percentile


7.49

37.52

-15.08

-12.79

-17.22

-12.11

-6.69

-2.58


S&P/TSX Small Cap


6.64

47.71

-8.59

-2.92

-4.79

-3.20

-2.11

4.51


BMO Small Cap weighted


8.78

48.71

-5.16

0.79

-2.11

-0.87

0.35

5.95

U.S. equity












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


9.74

34.83

26.26

35.55

19.71

23.93

21.61

18.11


1st quartile


9.38

26.23

13.40

22.22

16.17

18.24

18.08

15.70


Median


6.61

23.32

9.56

16.74

10.52

13.52

13.45

12.92


3rd quartile


5.11

20.40

2.61

7.17

6.94

11.36

11.11

10.84


95th percentile


1.54

13.72

-3.96

0.22

4.93

9.81

9.21

8.28


S&P 500 (C$)


6.62

23.46

8.43

15.98

11.22

14.80

14.31

14.14

 

Rates of return for periods ending September 30, 2020
(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


9.44

24.63

11.78

22.01

13.29

12.81

12.92

11.42


1st quartile


7.39

21.46

3.05

10.08

7.07

6.56

8.20

8.08


Median


4.92

15.57

-0.15

6.68

4.01

4.52

6.22

6.47


3rd quartile


1.59

11.63

-7.58

-1.77

-0.98

0.71

3.57

4.22


95th percentile


-0.59

7.87

-15.75

-11.31

-8.26

-4.54

0.32

1.38


MSCI EAFE (C$)


2.78

12.98

-4.30

1.39

1.22

2.85

5.38

5.18

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


9.47

33.69

24.00

35.02

20.65

19.87

18.87

16.82


1st quartile


7.76

24.35

7.46

17.34

12.07

13.92

13.04

11.94


Median


5.34

21.80

0.50

6.66

4.74

8.28

8.70

9.57


3rd quartile


3.55

14.84

-6.32

-1.24

0.80

4.35

6.19

7.39


95th percentile


2.23

9.82

-10.86

-4.96

-3.06

1.44

4.30

5.20


MSCI World (C$)


5.85

20.89

4.76

11.39

7.79

10.13

10.70

10.39

Emerging markets












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


12.19

35.00

15.23

24.44

13.24

9.93

12.46

13.38


1st quartile


9.83

27.18

4.88

16.90

10.27

7.14

10.60

11.71


Median


8.39

23.89

3.95

13.82

7.73

5.96

8.16

9.47


3rd quartile


7.35

21.89

-4.09

2.49

2.64

1.90

4.99

6.02


95th percentile


1.54

11.03

-10.63

-8.66

-3.87

-3.07

0.28

3.29


MSCI Emerging markets


7.59

21.67

2.07

11.89

6.18

5.07

7.92

9.28

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, Morneau Shepell, 855-622-3327, media@morneaushepell.com; Jean Bergeron, FSA, FCIA, CFA, Partner, Asset and Risk Management, 514-239-5099, jbergeron@morneaushepell.com