Morneau Shepell reports Good pension fund returns in the first quarter of 2015

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

MONTREAL, April 21, 2015 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the first quarter of 2015.

According to the report, in the first quarter of 2015, diversified pooled fund managers posted a median return of 6.0 per cent before management fees.

"Stock and bond markets made important advances in the first quarter, generating very high pension fund returns. However, bond interest rates continued to decline, which significantly increased the solvency liability for pension funds given that pension funds use long-term government bond yields to calculate that liability. With the decline in yields, the solvency liability of an average pension fund increased by 8.6 per cent in the first quarter, while the median return was up 6.0 per cent. This means that excluding special contributions, the financial position of an average pension fund on a solvency basis has deteriorated since the start of 2015," said Jean Bergeron, Partner and responsible for the Morneau Shepell's Asset and Risk Management Consulting team.

On average, during the first quarter of 2015, diversified pooled fund managers under-performed the benchmark. In fact, the median return (6.0 per cent) for these managers was 0.4 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 6.4% used by many pension funds.

Canadian bonds
In the first quarter of 2015, managers obtained a median return of 4.1 per cent on bonds (Universe mandate) which was inferior to the benchmark FTSE TMX Canada Universe Bond Index return
(4.2 per cent).

During the same period, long-term bonds posted a return of 7.1 per cent, while the return for medium-term bonds was 4.3 per cent and for short-term bonds 1.9 per cent. High-yield bonds achieved a return of 1.3 per cent, while real return bonds provided a 7.3 per cent return.

Canadian equities
During the first quarter of 2015, Canadian equity managers obtained a median return of 2.6 per cent, equal to the S&P/TSX Index 2.6 per cent).

During that same period, the S&P/TSX Small Cap Index decreased by 0.3 per cent, whereas the S&P/TSX Completion Index that represents mid-cap stocks rose 3.1 per cent, and the large-cap S&P/TSX 60 Index posted gains of 2.4 per cent.

Foreign equities
Foreign equity managers' median returns and appropriate benchmark indices for the first quarter of 2015 are as follows:

  • 11.1 per cent for U.S. equities versus 10.2 per cent for the S&P 500 Index (C$);
  • 14.7 per cent for international equities versus 14.7 per cent for the MSCI EAFE Index (C$);
  • 12.1 per cent for global equities versus 11.9 per cent for the MSCI World Index (C$);
  • 9.8 per cent for emerging markets equities versus 11.8 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments
The Dow Jones Credit Suisse Hedge Fund Index (previously CSFB/Tremont Hedge Fund Index) posted a return of 11.9 per cent (C$) for the first quarter of 2015.

The Performance Universe covers about 354 pooled funds managed by nearly 50 investment management firms. The pooled funds included in the Universe have a market value of more than $250 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 and 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 largest company in Canada offering human resources consulting and outsourcing services. The Company is the leading provider of Employee and Family Assistance Programs, as well as the largest administrator of retirement 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 more than 8,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 3,300 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, 2015
(annualized returns beyond one year)

Diversified












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


7.66

11.49

13.81

16.60

16.55

15.39

12.79

12.37


1st quartile


6.87

9.39

10.65

14.19

15.26

13.55

10.75

10.82


Median


5.95

8.13

8.89

12.17

14.38

12.92

9.74

10.36


3rd quartile


4.90

6.78

6.94

10.13

12.75

11.24

8.83

9.28


95th percentile


2.46

1.05

0.92

4.77

8.03

8.72

5.56

6.56


Benchmark*


6.41

8.99

10.35

14.10

12.71

10.93

9.19

9.60


Benchmark**


6.48

8.93

10.25

14.05

13.23

11.34

9.25

9.73













*     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


0.42

0.75

1.09

1.44

1.44

1.47

1.46

1.39


1st quartile


0.32

0.63

0.95

1.25

1.25

1.24

1.24

1.21


Median


0.29

0.59

0.89

1.19

1.20

1.21

1.20

1.16


3rd quartile


0.27

0.53

0.81

1.09

1.14

1.14

1.16

1.10


95th percentile


0.24

0.48

0.76

1.01

1.03

1.04

1.06

1.01


FTSE TMX CANADA
T-Bill 91 days

0.25

0.47

0.72

0.94

0.97

0.99

0.97

0.93











Canadian bonds











3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


7.32

12.80

15.37

19.53

8.92

8.45

10.60

10.19


1st quartile


4.37

7.11

8.25

10.58

6.30

6.48

7.09

7.49


Median


4.12

6.79

7.90

10.20

5.55

5.56

6.57

6.49


3rd quartile


3.66

6.03

6.91

9.24

5.21

5.16

6.28

6.16


95th percentile


2.50

2.03

2.17

3.29

3.85

3.44

5.70

5.68


FTSE TMX CANADA Universe


4.15

6.96

8.10

10.26

5.44

5.14

6.27

6.04












Canadian bonds (Universe mandate)









3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


4.36

7.12

8.25

10.62

6.42

6.01

6.84

6.77


1st quartile


4.17

6.96

8.14

10.31

5.77

5.66

6.58

6.46


Median


4.07

6.80

7.92

10.21

5.44

5.39

6.46

6.22


3rd quartile


3.92

6.40

7.41

9.59

5.17

5.14

6.27

6.04


95th percentile


3.43

5.68

6.57

8.50

4.79

4.79

5.80

5.65


FTSE TMX CANADA Universe


4.15

6.96

8.10

10.26

5.44

5.14

6.27

6.04


Mortgages












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


2.17

3.68

4.40

5.85

4.84

4.72

4.98

5.39


1st quartile


2.15

3.62

4.35

5.77

4.64

4.48

4.91

5.23


Median


2.12

3.54

4.29

5.67

4.38

4.17

4.82

5.02


3rd quartile


1.77

3.22

4.22

5.58

4.15

4.11

4.72

4.94


95th percentile


1.49

2.96

4.17

5.51

3.96

4.07

4.64

4.88


FTSE TMX CANADA Mortgage Market

1.01

1.88

2.75

3.63

3.87

4.23

4.61

4.56











Canadian equity – Broad*










3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


6.38

7.67

9.38

15.29

19.96

17.82

11.15

12.22


1st quartile


4.25

5.24

4.70

11.26

16.47

14.12

7.95

10.21


Median


2.60

1.97

2.25

7.82

13.89

12.36

6.58

8.83


3rd quartile


1.29

-1.36

-1.77

4.46

11.60

10.94

4.72

7.43


95th percentile


-0.33

-4.91

-7.49

-1.50

6.19

6.35

1.12

5.03


S&P/TSX


2.58

1.08

0.48

6.93

11.36

9.58

4.39

7.41


S&P/TSX Capped

2.58

1.08

0.48

6.93

11.36

9.58

4.39

7.41


*     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


6.89

3.65

1.45

14.56

24.24

18.58

10.91

14.96


1st quartile


5.10

2.12

-1.89

9.54

20.63

16.40

8.54

11.88


Median


4.55

0.45

-4.53

3.04

15.19

12.21

7.18

11.44


3rd quartile


1.52

-3.66

-7.55

-2.20

11.23

8.93

5.47

9.53


95th percentile


-3.85

-7.27

-13.57

-8.64

5.31

0.92

-2.94

3.50


S&P/TSX Small Cap

-0.25

-8.95

-17.48

-9.75

2.06

-1.11

-4.79

1.98


BMO Small Cap weighted

0.01

-7.25

-15.43

-8.21

3.15

0.85

-2.24

4.08











U.S. equity












3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile


15.00

27.65

35.15

34.52

36.94

28.57

24.67

22.95


1st quartile


12.12

24.01

30.43

31.05

33.64

26.76

23.11

20.31


Median


11.13

21.34

27.22

28.62

30.67

25.71

21.94

19.52


3rd quartile


9.43

19.18

24.76

25.33

28.70

23.53

19.68

17.85


95th percentile


5.49

11.09

12.86

15.16

23.67

20.24

16.66

14.86


S&P 500 (C$)


10.22

19.79

27.16

29.16

30.86

25.74

22.06

19.63




















International equity (Europe and Asia)









3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile



16.93

22.37

20.48

20.61

24.24

21.27

16.71

15.61


1st quartile



15.78

17.74

16.75

17.00

22.87

19.69

14.67

13.68


Median



14.69

15.02

14.49

14.92

20.85

18.18

12.79

11.55


3rd quartile



13.59

13.66

13.17

12.64

19.55

17.16

11.90

10.86


95th percentile



11.36

10.94

8.24

7.20

14.87

14.81

10.73

9.64


MSCI EAEO (C$)



14.68

14.61

13.18

13.69

20.50

17.98

12.29

10.97













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



14.68

23.23

25.25

26.70

29.57

26.00

21.75

19.68


1st quartile



13.12

18.96

21.49

22.44

27.09

23.25

18.40

16.68


Median



12.06

17.61

19.54

20.06

24.51

21.23

16.98

15.69


3rd quartile



11.25

14.20

17.41

16.60

22.33

19.77

14.87

13.36


95th percentile



9.07

10.82

10.67

12.91

18.23

17.35

11.72

10.76


MSCI Monde (C$)



11.88

17.12

20.23

21.66

25.45

21.40

16.60

14.99













Emerging markets














3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years


5th percentile



12.43

14.01

15.98

19.74

15.57

13.71

10.31

8.64


1st quartile



11.26

10.94

12.93

17.49

12.56

10.74

7.25

7.15


Median



9.82

7.60

10.11

14.40

10.06

8.61

5.24

6.57


3rd quartile



8.35

6.96

7.53

11.07

6.98

6.57

3.98

5.79


95th percentile



5.06

2.61

3.09

7.22

4.34

6.00

2.98

5.39


MSCI Emerging markets


11.84

10.77

12.31

15.65

11.49

8.93

4.99

6.70































 

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: Josée St-Pierre, Senior consultant, Marketing, 514-392-7862, jstpierre@morneaushepell.com; Jean Bergeron, FSA, FICA, CFA, Partner, 514-392-7852, jbergeron@morneaushepell.com

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