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

Pension funds benefit from fourth-quarter market rebound

Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers’ Pooled Funds for the fourth quarter of 2020.

According to the report, in the fourth quarter of 2020, diversified pooled fund managers posted a median return of 5.7 per cent before management fees and 9.3 per cent since the beginning of the year.

“The stock market rebound continued into the fourth quarter, most market indices showed positive returns. The MSCI World Index delivered 8.7 per cent return for the fourth quarter, while the bond market posted a return of 0.6 per cent. The Canadian Equity S&P/TSX Composite Index posted a return of 9.0 per cent and the U.S. stock S&P 500 Index registered a return of 12.2 per cent (in U.S. dollars) and 7.0 per cent in Canadian dollars. The Emerging Markets Index posted a return of 14.2 per cent (in Canadian dollars),” said Jean Bergeron, Partner for the Morneau Shepell Asset & Risk Management consulting team.

“The good returns obtained in the fourth quarter enabled pension funds to improve their financial position. We estimate that the solvency ratio of an average pension fund has increased by around 2.3 per cent to 5.5 per cent in 2020,” added Bergeron.

During the fourth quarter of 2020, diversified pooled fund managers obtained a median return of 5.7 per cent, which was 0.3 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. Since the beginning of the year, the median pension fund return was 9.3 per cent, which was 1.3 per cent lower than the benchmark portfolio.

Canadian bonds

In the fourth quarter of 2020, managers obtained a median return of positive 1.0 per cent on bonds (Universe mandate); the return was 0.4 per cent higher than the benchmark index. Since the beginning of the year, managers posted a median return, which was 1.1 per cent above the benchmark index.

During the fourth quarter of 2020, short-term, mid-term and long-term bond indices posted returns of 0.5 per cent, 0.6 per cent and 0.8 per cent respectively. The high-yield bond index posted a return of 4.1 per cent, while the real return bond index provided a 1.8 per cent return.

In 2020, short-term, mid-term and long-term bond indices posted returns of 5.3 per cent, 10.1 per cent and 11.9 per cent respectively. The high-yield bond index posted a return of 6.7 per cent, while the real return bond index provided a 13.0 per cent return.

Canadian equities

In the fourth quarter of 2020, the median return for Canadian equity managers was 8.5 per cent, which was 0.5 per cent lower than the 9.0 per cent posted by the S&P/TSX Index. Since the beginning of the year, managers posted a median return of 5.0 per cent, which was 0.6 percent under the S&P/TSX Index

During the fourth quarter of 2020, the S&P/TSX Small Cap Index gained 23.5 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks registered an increase of 13.3 per cent, and the large-cap S&P/TSX 60 Index grew by 7.9 per cent.

Foreign equities

Foreign equity managers’ median returns and appropriate benchmark indices’ returns for the fourth quarter of 2020 are as follows:

  • 6.8 per cent for U.S. equities versus 7.0 per cent for the S&P 500 Index (C$);
  • 10.6 per cent for international equities versus 10.7 per cent for the MSCI EAFE Index (C$);
  • 9.4 per cent for global equities versus 8.7 per cent for the MSCI World Index (C$);
  • 14.1 per cent for emerging market equities versus 14.2 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments

The Dow Jones Credit Suisse Hedge Fund Index (formerly CSFB/Tremont Hedge Fund Index) posted a return of 1.5 per cent (C$) for the fourth quarter of 2020 and 4.3 per cent (C$) for 2020 as a whole.

The Performance Universe covers about 294 funds managed by nearly 46 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 clients 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 December 31, 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

8.32

 

14.59

 

28.69

 

14.69

 

15.57

 

9.36

 

10.15

 

9.68

 

1st quartile

7.00

 

12.06

 

24.70

 

10.67

 

13.61

 

7.98

 

8.34

 

8.24

 

Median

5.71

 

10.28

 

21.96

 

9.27

 

12.17

 

6.79

 

7.32

 

7.58

 

3rd quartile

5.01

 

9.47

 

20.30

 

7.47

 

10.80

 

5.75

 

6.49

 

6.94

 

95th percentile

3.02

 

8.33

 

18.78

 

2.30

 

8.55

 

3.72

 

4.41

 

5.79

 

Benchmark*

5.36

 

8.51

 

21.75

 

10.64

 

13.31

 

7.86

 

8.12

 

8.06

 

Benchmark**

5.78

 

9.23

 

22.94

 

10.61

 

13.58

 

7.92

 

8.26

 

8.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* 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

0.71

 

1.60

 

4.35

5.87

 

4.47

 

3.66

 

2.95

 

2.65

 

1st quartile

0.19

 

0.38

 

0.66

1.15

 

1.63

 

1.69

 

1.55

 

1.43

 

Median

0.10

 

0.24

 

0.48

0.99

 

1.49

 

1.57

 

1.44

 

1.33

 

3rd quartile

0.09

 

0.20

 

0.46

0.92

 

1.44

 

1.52

 

1.39

 

1.27

 

95th percentile

0.04

 

0.12

 

0.27

0.60

 

1.22

 

1.39

 

1.30

 

1.22

Canadian bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 months

 

6 months

 

9 months

1 year

 

2 years

 

3 years

 

4 years

 

5 years

 

5th percentile

4.00

 

7.41

 

16.68

12.92

 

13.46

 

8.79

 

8.36

 

7.66

 

1st quartile

1.76

 

3.35

 

12.29

10.99

 

9.50

 

6.63

 

5.83

 

5.47

 

Median

1.16

 

2.20

 

9.88

9.90

 

8.72

 

6.21

 

5.45

 

4.83

 

3rd quartile

0.83

 

1.46

 

8.06

8.97

 

8.29

 

5.89

 

5.23

 

4.57

 

95th percentile

0.48

 

0.69

 

6.60

6.05

 

5.67

 

4.30

 

3.41

 

3.36

Canadian bonds (Universe mandate)

 

 

 

 

 

 

 

 

 

 

 

3 months

 

6 months

 

9 months

1 year

 

2 years

 

3 years

 

4 years

 

5 years

 

5th percentile

1.62

 

3.19

 

11.03

11.05

 

9.23

 

6.68

 

5.83

 

5.43

 

1st quartile

1.21

 

2.47

 

9.62

10.45

 

8.72

 

6.27

 

5.52

 

4.83

 

Median

0.95

 

1.79

 

8.40

9.80

 

8.51

 

6.16

 

5.30

 

4.70

 

3rd quartile

0.76

 

1.44

 

7.90

9.23

 

8.11

 

5.94

 

5.20

 

4.50

 

95th percentile

0.50

 

1.06

 

6.35

7.14

 

7.11

 

5.17

 

4.49

 

4.17

             

 

Rates of return for periods ending December 31, 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

14.74

 

22.51

 

40.47

 

13.54

 

18.05

 

9.22

 

9.53

 

10.54

 

1st quartile

10.77

 

18.82

 

36.16

 

7.83

 

15.10

 

6.72

 

7.72

 

9.51

 

Median

8.52

 

14.52

 

31.72

 

5.03

 

12.70

 

5.41

 

6.40

 

8.62

 

3rd quartile

7.17

 

13.09

 

24.07

 

2.86

 

10.33

 

4.21

 

5.82

 

7.80

 

95th percentile

3.85

 

10.62

 

19.92

 

-2.12

 

5.83

 

1.10

 

2.60

 

5.27

 

S&P/TSX

8.97

 

14.13

 

33.50

 

5.60

 

13.91

 

5.74

 

6.57

 

9.33

 

S&P/TSX Capped

8.97

 

14.13

 

33.50

 

5.60

 

13.91

 

5.74

 

6.57

 

9.33

 

* 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

17.83

 

33.90

 

85.25

 

27.71

 

27.32

 

12.24

 

11.05

 

12.91

 

1st quartile

15.02

 

28.05

 

70.46

 

25.53

 

25.64

 

10.71

 

10.60

 

12.48

 

Median

14.83

 

25.81

 

61.42

 

19.89

 

24.15

 

9.13

 

8.50

 

10.10

 

3rd quartile

11.43

 

23.98

 

60.38

 

18.38

 

21.22

 

7.11

 

5.86

 

8.30

 

95th percentile

9.23

 

23.44

 

56.77

 

8.30

 

7.92

 

-3.92

 

-3.01

 

2.20

 

S&P/TSX Small Cap

23.48

 

31.68

 

82.39

 

12.87

 

14.34

 

2.28

 

2.40

 

8.77

 

BMO Small Cap weighted

20.66

 

31.26

 

79.44

 

14.44

 

16.80

 

3.74

 

4.39

 

9.96

U.S. equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 months

 

6 months

 

9 months

 

1 year

 

2 years

 

3 years

 

4 years

 

5 years

 

5th percentile

12.33

 

20.37

 

45.75

 

31.08

 

27.91

 

22.28

 

23.66

 

17.79

 

1st quartile

8.94

 

17.47

 

35.45

 

21.37

 

24.26

 

17.99

 

18.51

 

16.81

 

Median

6.83

 

14.21

 

32.65

 

18.13

 

20.97

 

13.84

 

13.68

 

12.78

 

3rd quartile

6.01

 

13.63

 

30.60

 

12.00

 

15.78

 

12.51

 

11.53

 

10.99

 

95th percentile

3.37

 

10.15

 

20.36

 

-1.14

 

10.34

 

9.48

 

10.12

 

8.58

 

S&P 500 (C$)

7.04

 

14.13

 

32.16

 

16.07

 

20.54

 

14.74

 

14.51

 

13.31

             

 

Rates of return for periods ending December 31, 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

18.58

 

25.29

 

42.49

 

24.16

 

23.29

 

14.14

 

16.75

 

11.70

 

1st quartile

11.13

 

20.23

 

36.38

 

13.99

 

16.97

 

8.05

 

11.28

 

8.45

 

Median

10.59

 

15.24

 

30.89

 

9.70

 

14.10

 

6.75

 

9.21

 

6.83

 

3rd quartile

7.17

 

11.55

 

22.75

 

3.22

 

8.66

 

3.48

 

6.94

 

5.76

 

95th percentile

5.49

 

8.65

 

18.15

 

-3.93

 

2.14

 

-1.39

 

2.90

 

2.17

 

MSCI EAFE (C$)

10.68

 

13.75

 

25.05

 

5.92

 

10.77

 

4.86

 

7.73

 

5.61

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

17.75

 

24.12

 

54.71

 

36.02

 

31.39

 

20.67

 

21.99

 

16.65

 

1st quartile

13.10

 

19.05

 

38.48

 

18.53

 

21.33

 

13.78

 

15.27

 

12.01

 

Median

9.39

 

16.55

 

33.16

 

11.64

 

15.27

 

8.83

 

11.23

 

9.29

 

3rd quartile

6.72

 

12.53

 

26.17

 

4.40

 

8.99

 

5.31

 

8.01

 

7.81

 

95th percentile

3.35

 

7.48

 

15.27

 

-0.94

 

7.03

 

3.43

 

5.47

 

6.33

 

MSCI World (C$)

8.69

 

15.05

 

31.40

 

13.87

 

17.48

 

11.16

 

11.95

 

10.27

Emerging markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 months

 

6 months

 

9 months

 

1 year

 

2 years

 

3 years

 

4 years

 

5 years

 

5th percentile

17.57

 

29.30

 

56.13

 

33.38

 

23.90

 

13.19

 

17.44

 

15.38

 

1st quartile

15.80

 

26.90

 

45.93

 

22.65

 

20.64

 

9.57

 

15.23

 

13.65

 

Median

14.13

 

24.81

 

42.97

 

18.86

 

15.54

 

8.29

 

13.60

 

12.08

 

3rd quartile

13.23

 

23.13

 

39.15

 

9.91

 

12.59

 

5.28

 

10.77

 

9.78

 

95th percentile

10.11

 

14.63

 

27.35

 

3.18

 

2.54

 

0.82

 

4.02

 

4.74

 

MSCI Emerging markets

14.24

 

22.90

 

38.99

 

16.60

 

14.72

 

7.16

 

12.18

 

11.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 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.

ID-CORP ID-RS

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

Source: Morneau Shepell