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

Pension fund returns flat in first quarter of 2016

TORONTO, April 20, 2016 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the first quarter of 2016.

According to the report, in the first quarter of 2016, diversified pooled fund managers posted a median return of 0 per cent before management fees.

"Pension funds barely held their own in the first quarter with a median return of 0 per cent. Even though Canadian equities made good advances, foreign equities lost ground in the first quarter. The rise in the Canadian dollar versus several other currencies, and especially the U.S. dollar, significantly reduced returns on foreign equities calculated in Canadian dollars. Note that in the past several years many pension funds have decreased the Canadian equity weighting in their portfolios, opting instead for foreign equities and/or investments in real estate and infrastructure, which has been generally profitable in recent years," said Jean Bergeron, Partner responsible for Morneau Shepell's Asset and Risk Management Consulting team.

"On a solvency basis, pension fund financial positions declined by about 5 per cent in the first quarter, due to weak returns and the increase in the solvency liability," added Bergeron.

On average, during the first quarter of 2016, diversified pooled fund managers underperformed the benchmark. In fact, the median return (0 per cent) for these managers was 0.3 per cent lower than the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) and a return of (0.3 per cent) used by many pension funds.

Canadian bonds

In the first quarter of 2016, managers obtained a median return of 1.4 per cent on bonds (Universe mandate) which was equal to the benchmark FTSE TMX Canada Universe Bond Index return (1.4 per cent).

During the same period, long-term bonds posted a return of 2.6 per cent, while the return for medium-term bonds was 1.5 per cent and for short-term bonds 0.4 per cent. High-yield bonds posted 0.9 per cent, while real return bonds provided a 2.1 per cent return.

Canadian equities

During the first quarter of 2016, the median return for Canadian equity managers was 4.0 per cent, which is 0.5 per cent lower than the 4.5 per cent achieved by the S&P/TSX Index.

During the first quarter of 2016 the S&P/TSX Small Cap Index increased by 8.5 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks rose 5.5 per cent, and the large-cap S&P/TSX 60 Index posted gains of 4.2 per cent.

Foreign equities

Foreign equity managers' median returns and appropriate benchmark indices for the first quarter of 2016 are as follows:

  • negative 5.7 per cent for U.S. equities versus negative 4.9 per cent for the S&P 500 Index (C$);
  • negative 8.4 per cent for international equities versus negative 9.7 per cent for the MSCI EAFE Index (C$);
  • negative 5.8 per cent for global equities versus negative 7.2 per cent for the MSCI World Index (C$);
  • negative 2.1 per cent for emerging markets equities versus negative 1.5 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments

The Dow Jones Credit Suisse Hedge Fund Index (previously CSFB/Tremont Hedge Fund Index) posted a return of negative 8.2 per cent (C$) for the first quarter of 2016.

The Performance Universe covers about 342 pooled funds managed by nearly 50 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 Inc.

Morneau Shepell is the only human resources consulting and technology company that takes an integrative approach to employee assistance, health, benefits, and retirement needs. The Company is the leading provider of Employee and Family Assistance Programs, as well as the largest administrator of pension and benefits plans. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity, and improve their competitive position. Established in 1966, Morneau Shepell serves approximately 21,000 clients, ranging from small businesses to some of the largest corporations and associations in North America.  With almost 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, 2016
(annualized returns beyond one year)

Diversified












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


3.82

4.93

2.58

2.14

8.92

11.48

12.00

10.55


1st quartile


1.15

3.81

1.62

0.11

6.69

9.92

9.81

8.23


Median


-0.05

3.08

0.08

-1.31

5.35

8.92

8.89

7.11


3rd quartile


-0.74

2.23

-1.46

-2.34

4.17

7.92

7.94

6.63


95th percentile


-2.66

-0.65

-4.39

-5.24

1.09

5.11

5.70

3.89


Benchmark*


0.28

2.90

-0.10

-2.19

5.64

7.50

7.50

6.81


Benchmark**


0.13

2.86

-0.41

-2.40

5.50

7.76

7.73

6.82













*     2% 91-day T-Bills. 21.5% FTSE TMX Canada Long Term, 21.5% FTSE TMX CANADA Universe, 27.5% S&P/TSX, 27.5% MSCI ACWI (C$)


**   2% 91-day T-Bills. 19% FTSE TMX Canada Long Term, 19% FTSE TMX CANADA Universe, 30% S&P/TSX, 30% MSCI ACWI (C$)


Returns compounded quarterly










Money market












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


0.35

0.77

0.88

1.10

2.08

1.26

1.29

1.32


1st quartile


0.24

0.48

0.70

0.95

1.16

1.14

1.16

1.18


Median


0.22

0.43

0.62

0.87

1.04

1.09

1.12

1.13


3rd quartile


0.18

0.38

0.52

0.74

0.96

1.03

1.05

1.09


95th percentile


0.15

0.28

0.41

0.59

0.82

0.89

0.93

0.97


FTSE TMX CANADA
T-Bill 91 days


0.13

0.22

0.37

0.52

0.73

0.82

0.87

0.88









Canadian bonds











3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


2.97

4.71

4.40

1.60

9.16

5.82

6.13

8.33


1st quartile


1.88

2.80

2.93

1.15

5.76

4.44

4.80

5.70


Median


1.49

2.39

2.53

0.64

5.33

3.83

4.36

5.37


3rd quartile


1.34

2.06

1.79

-0.39

4.61

3.63

4.13

5.14


95th percentile


0.57

0.33

-1.80

-3.40

0.95

2.57

2.87

3.99


FTSE TMX CANADA Universe


1.39

2.38

2.53

0.78

5.41

3.87

4.03

5.15







Canadian bonds (Universe mandate)









3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


1.79

3.00

3.24

1.47

5.91

4.54

4.81

5.70


1st quartile


1.58

2.62

2.79

1.17

5.56

4.11

4.43

5.45


Median


1.42

2.42

2.53

0.83

5.31

3.83

4.22

5.28


3rd quartile


1.36

2.26

2.22

0.61

4.99

3.74

4.10

5.15


95th percentile


0.89

1.34

1.00

-0.56

4.20

3.31

3.85

4.80


FTSE TMX CANADA Universe


1.39

2.38

2.53

0.78

5.41

3.87

4.03

5.15


Rates of return for periods ending March 31, 2016
(annualized returns beyond one year)

Mortgages












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


0.86

1.61

1.92

2.63

4.23

4.11

4.22

4.52


1st quartile


0.77

1.50

1.88

2.51

4.15

4.01

4.10

4.46


Median


0.66

1.38

1.83

2.36

4.05

3.87

3.95

4.40


3rd quartile


0.55

1.25

1.77

2.22

3.95

3.74

3.80

4.33


95th percentile


0.47

1.15

1.73

2.10

3.87

3.63

3.67

4.28


FTSE TMX CANADA
Mortgage Market


0.84

1.69

2.55

3.42

3.52

3.72

4.03

4.37








Canadian equity – Broad*










3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


7.20

7.46

3.86

1.83

6.73

13.20

13.23

9.16


1st quartile


5.38

5.95

-0.30

-2.05

3.71

9.19

9.27

5.96


Median


3.95

3.34

-3.42

-4.63

2.16

7.78

8.00

4.19


3rd quartile


2.47

1.88

-5.00

-6.39

-0.39

5.48

6.21

2.79


95th percentile


-0.37

-0.89

-7.76

-9.35

-4.23

3.46

4.26

1.43


S&P/TSX


4.54

3.08

-5.02

-6.57

-0.05

5.03

5.30

2.10


S&P/TSX Capped


4.54

3.08

-5.02

-6.57

-0.05

5.03

5.30

2.10


*     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


5.23

11.09

4.37

6.48

8.54

16.78

14.34

11.87


1st quartile


4.14

7.61

-4.77

-4.36

1.96

9.48

9.82

5.78


Median


2.73

6.26

-6.52

-6.28

-1.62

8.21

7.32

4.20


3rd quartile


0.68

3.60

-8.62

-7.33

-4.14

5.31

5.07

1.95


95th percentile


-2.49

1.63

-12.54

-9.94

-8.99

2.14

1.38

0.23


S&P/TSX Small Cap


8.52

9.74

-6.91

-5.69

-7.74

-0.59

-2.27

-4.97


BMO Small Cap weighted


7.66

7.88

-8.02

-7.16

-7.69

-0.41

-1.21

-3.25










U.S. equity












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


-1.21

8.03

8.59

6.45

19.29

24.64

22.83

21.68


1st quartile


-3.93

5.48

5.26

3.78

15.99

21.56

19.97

18.67


Median


-5.66

1.72

1.97

0.93

14.16

20.57

19.23

17.50


3rd quartile


-7.61

0.81

0.27

-1.13

11.42

18.41

17.93

16.44


95th percentile


-9.93

-2.89

-4.28

-4.88

7.49

16.19

15.62

14.23


S&P 500 (C$)


-4.90

5.58

5.54

4.36

16.10

21.36

20.01

18.30

















 

Rates of return for periods ending March 31, 2016
(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


-3.24

5.25

6.53

8.89

13.60

17.89

17.88

14.57


1st quartile


-6.65

0.48

-1.03

-1.77

7.01

13.35

14.03

10.49


Median


-8.43

-1.17

-4.75

-4.55

4.92

11.99

12.09

9.04


3rd quartile


-9.66

-2.04

-5.67

-6.33

3.28

11.03

11.57

8.15


95th percentile


-10.58

-3.48

-7.28

-7.62

0.62

7.85

9.59

7.33


MSCI EAEO (C$)


-9.68

-2.02

-5.55

-6.32

3.20

10.80

11.37

8.29







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


-2.15

6.57

8.21

7.98

14.19

19.59

19.07

18.06


1st quartile


-3.78

4.75

4.13

3.24

12.08

16.93

16.76

14.58


Median


-5.81

2.29

0.82

0.16

9.91

15.68

15.45

12.42


3rd quartile


-7.81

0.67

-2.40

-2.69

8.00

14.71

14.15

11.63


95th percentile


-9.68

-2.22

-7.17

-6.98

3.26

10.14

11.75

8.61


MSCI Monde (C$)


-7.21

1.43

-0.28

-1.40

9.53

15.77

15.25

12.76










Emerging markets












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


2.62

6.65

0.46

1.14

6.04

7.47

8.92

7.80


1st quartile


-0.29

4.35

-6.25

-6.53

5.17

5.87

5.44

4.84


Median


-2.07

3.02

-7.37

-8.34

2.49

3.95

4.65

2.17


3rd quartile


-3.43

1.10

-8.16

-9.03

1.49

2.36

2.55

1.49


95th percentile


-4.75

0.44

-9.23

-10.17

-0.13

0.46

2.19

0.57


MSCI Emerging markets


-1.53

2.77

-9.26

-9.82

2.13

3.88

3.91

1.84

























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: Nathan Gibson, Corporate Communications, 416-390-2641, ngibson@morneaushepell.com; Jean Bergeron, FSA, FCIA, CFA, Partner, 514-392-7852, jbergeron@morneaushepell.com

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