Pension managers’ Q2 performances versus major indices

In Q2 2017, diversified pooled fund managers in Morneau Shepell’s Performance Universe of Pension Managers’ Pooled Funds posted a median return of 0.7% before management fees.

On average, says Morneau Shepell in a release, those fund managers underperformed the benchmark during the second quarter. The median return of 0.7% was 0.4% lower than the benchmark portfolio’s return of 1.1% (the portfolio has an allocation of 55% equity and 45% fixed income). Since the beginning of the 2017, the median pension fund return was 3.6%, 0.6% lower than the benchmark portfolio.

Still, 0.7% is better than the Canadian stock market’s negative performance during the same period, says Jean Bergeron, managing partner of Morneau Shepell’s Asset Management practice in Montreal. During the second quarter, he adds, “The rise in the Canadian dollar versus several foreign currencies had a negative impact on Canadian investors,” although Canadian bonds ended the quarter with positive returns.

Read: Time for neutral on Canadian equities

On a global scale, says Bergeron, emerging market equities dominated for the second quarter in a row with the MSCI Emerging Markets Index returning 6.7% in local EM currency, while both the S&P 500 Index and MSCI EAFE Index returned around 3% in their local currencies.

Canadian bonds


In the second quarter of 2017, managers obtained a median return of 1.1% on bonds, which was equal to the benchmark, says Morneau Shepell, citing returns of its Universe mandate. Since the beginning of 2017, managers obtained a median return of 2.5% on bonds, which was 0.1% above the benchmark.

What about alternatives? Canada’s leading pension funds, such as the Ontario Municipal Employees Retirement System (OMERS), have experienced solid, double-digit performance using alternative asset classes, including real estate, infrastructure and private equity, reports BenefitsCanada.com. Read more.

Over the same period, long-term bonds posted a return of 4.1% while the return was negative 0.1% for medium-term bonds and negative 0.4% for short-term bonds. High-yield bonds posted 1.7%, while real return bonds provided a positive 1.4% return.

Canadian equities


In the second quarter of 2017, the median return for Canadian equity managers was negative 1.4%, which is 0.2% higher than the negative 1.6% achieved by the S&P/TSX Index.

During the same period, the S&P/TSX Small Cap Index decreased by 5.5%, whereas the S&P/TSX Completion Index representing mid-cap stocks lost 1.2%, and the large-cap S&P/TSX 60 Index registered a fall of 1.8%.

Solvency

Pension fund financial positions declined in the second quarter, says Bergeron, “largely due to lower interest rates in the first two months. The solvency liability for an average pension plan rose 6.2%, while the median return was only 0.7%.”

Read:

Half of pension fund assets in alt investments

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