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Morneau Shepell releases the results of its Performance Universe of Pension Managers' Pooled Funds for the first quarter of 2014
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Morneau Shepell releases the results of its Performance Universe of Pension Managers' Pooled Funds for the first quarter of 2014

Pension funds see a good start to the year

TORONTO, April 25, 2014 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the first quarter of 2014.

According to the report, in the first quarter of 2014, diversified pooled fund managers posted a median return of 4.6% before management fees.

The stock market continued to perform well in the first quarter, and the bond market achieved good returns due to a decrease in interest rates. Moreover, the Canadian dollar's weakness against other major currencies had a positive impact on foreign investments, converted into Canadian dollars. This has resulted in excellent returns for pension plans since the beginning of the year.

"Given the decrease in interest rates used to discount pension benefits, the solvency liability of an average pension fund was up about 3.9% in the first quarter. Pension fund financial positions have thus slightly improved since the beginning of the year. On a solvency basis, it is estimated that for an average pension fund the solvency ratio improved by about five points in the first quarter," said Jean Bergeron, partner and leader of Morneau Shepell's Asset and Risk Management Consulting team.

On average, during the first quarter of 2014, diversified pooled fund managers outperformed the benchmark. In fact, these managers' median return (4.6%) was 0.3% above that of the benchmark portfolio (with allocation of 55% in equity and 45% in fixed income) used by many pension funds (4.3%).

Canadian Bonds
Since the beginning of 2014, managers obtained a median return of 2.9% on bonds (Universe mandate), which is 0.1% above the DEX Universe Bond Index return (2.8%).

During the same period, long-term bonds posted a return of 5.1%, while the return for medium-term bonds was 3.2% and for short-term bonds 1.1%. High-yield bonds achieved a return of 3.9%, while real return bonds provided a -6.1% return.

Canadian equity
Since the beginning of 2014, Canadian equity managers obtained a median return of 5.8%, compared to a return of 6.1% for the S&P/TSX Index.

During that same period, the S&P/TSX Small Cap Index increased by 7.9%, whereas the S&P/TSX Completion Index that represents mid-cap stocks gained 7.6%, and the large-cap S&P/TSX 60 Index posted gains of 5.5%.

Foreign equity
Foreign equity managers' median returns and appropriate benchmark indices for the first quarter of 2014 are as follows:

  • 5.6% for U.S. equities versus 5.8% for the S&P 500 Index (C$)
  • 4.5% for international equities versus 4.6% for the MSCI EAFE Index (C$)
  • 5.4% for global equities versus 5.2% for the MSCI World Index (C$)
  • 3.8% for emerging markets equities versus 3.5% for the MSCI Emerging Markets Index (C$)

Alternative investments
The Dow Jones Credit Suisse Hedge Fund Index (previously CSFB/Tremont Hedge Fund Index) posted a return of 4.9% (C$) for the first quarter of 2014.

The Performance Universe covers about 360 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 and the largest provider of integrated absence management solutions in Canada. 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 21,000 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, 2014
(ANNUALIZED RETURNS BEYOND ONE YEAR)
         
DIVERSIFIED         
      3 months 6 months 9 months 1 year 2 years 3 years 4 years 5 years
  5th percentile   5.74 13.11 18.16 19.85 16.20 12.63 12.42 15.38
  1st quartile   4.97 11.92 16.83 17.60 14.28 10.52 10.73 13.60
  Median   4.59 11.55 15.64 16.11 12.45 8.61 9.36 11.94
  3rd quartile   4.07 10.84 15.16 14.36 11.67 7.52 8.31 10.74
  95th percentile   3.00 8.97 13.16 11.75 8.08 3.52 5.89 9.75
  Benchmark*   4.29 9.89 13.47 12.46 9.97 7.45 8.18 10.36
  Benchmark**   4.43 10.52 14.44 13.56 10.64 7.66 8.45 10.83
                 
  *  2% 91-day T-Bills. 43% DEX Universe. 27.5% S&P/TSX. 27.5% MSCI World (C$)
  ** 2% 91-day T-Bills. 38% DEX Universe. 30% S&P/TSX. 30% MSCI World (C$)
      Returns compounded quarterly
           
MONEY MARKET          
      3 months 6 months 9 months 1 year 2 years 3 years 4 years 5 years
  5th percentile   0.38 0.72 1.09 1.47 1.46 1.42 1.34 1.34
  1st quartile   0.32 0.63 0.97 1.27 1.24 1.27 1.22 1.16
  Median   0.30 0.61 0.92 1.21 1.21 1.20 1.15 1.06
  3rd quartile   0.28 0.57 0.87 1.15 1.16 1.17 1.10 0.99
  95th percentile   0.25 0.52 0.79 1.05 1.06 1.06 1.00 0.88
  DEX T-Bill 91 days 0.22 0.46 0.75 1.00 1.01 0.99 0.93 0.81
         
CANADIAN BONDS        
      3 months 6 months 9 months 1 year 2 years 3 years 4 years 5 years
  5th percentile   5.32 5.90 6.57 5.83 7.96 8.76 9.14 11.74
  1st quartile   3.41 4.45 4.15 1.94 3.80 6.64 6.73 8.17
  Median   3.01 3.62 3.77 1.13 3.22 5.49 5.55 6.31
  3rd quartile   2.80 3.36 3.39 0.59 2.73 5.08 5.19 5.66
  95th percentile   2.41 2.68 2.97 -1.10 1.96 4.24 4.69 5.03
  DEX Universe   2.77 3.16 3.28 0.84 2.67 4.98 5.02 5.04
       
CANADIAN BONDS (UNIVERSE MANDATE)      
      3 months 6 months 9 months 1 year 2 years 3 years 4 years 5 years
  5th percentile   3.46 4.20 4.54 2.39 4.36 5.90 6.05 7.05
  1st quartile   3.05 3.64 3.89 1.60 3.50 5.52 5.55 6.35
  Median   2.93 3.48 3.70 1.23 3.23 5.31 5.33 6.02
  3rd quartile   2.80 3.28 3.33 0.79 2.91 5.05 5.07 5.44
  95th percentile   2.61 3.00 3.01 0.43 2.54 4.64 4.66 5.01
  DEX Universe   2.77 3.16 3.28 0.84 2.67 4.98 5.02 5.04
           
MORTGAGES          
      3 months 6 months 9 months 1 year 2 years 3 years 4 years 5 years
  5th percentile   1.54 2.76 4.02 3.84 4.16 4.70 5.29 5.70
  1st quartile   1.50 2.68 3.76 3.52 3.84 4.63 5.11 5.27
  Median   1.45 2.59 3.42 3.11 3.44 4.54 4.90 4.73
  3rd quartile   1.41 2.38 3.15 2.74 3.39 4.44 4.78 4.68
  95th percentile   1.38 2.21 2.93 2.44 3.35 4.35 4.69 4.65
  DEX Mortgage Market 2.30 3.31 3.75 4.12 4.53 4.94 4.79 5.15
 
CANADIAN EQUITY - BROAD*
      3 months 6 months 9 months 1 year 2 years 3 years 4 years 5 years
  5th percentile   6.84 17.03 26.61 28.96 20.91 11.84 14.31 19.69
  1st quartile   6.19 15.62 23.55 22.71 17.03 9.01 10.94 16.34
  Median   5.76 14.02 22.52 20.44 14.31 6.25 8.96 14.84
  3rd quartile   5.24 13.38 20.64 17.28 12.29 3.89 7.76 13.58
  95th percentile   3.83 11.11 18.00 14.21 9.69 1.89 5.22 12.66
  S&P/TSX   6.06 13.79 20.91 15.97 10.93 3.55 7.53 13.71
  S&P/TSX Capped 6.06 13.79 20.91 15.97 10.93 3.55 7.53 13.71
  *  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   10.18 25.10 38.66 40.56 25.57 13.12 17.62 27.95
  1st quartile   8.56 21.34 35.92 37.50 21.65 10.77 15.74 24.69
  Median   6.78 18.66 30.79 29.66 16.89 8.31 13.15 22.28
  3rd quartile   5.60 17.04 26.54 26.53 15.05 5.95 11.38 20.74
  95th percentile   4.66 12.20 22.21 13.73 2.10 -4.45 4.51 14.74
  S&P/TSX Small Cap 7.94 15.37 24.56 15.41 3.52 -3.08 5.14 16.67
  BMO Small Cap weighted 8.86 16.49 25.44 15.92 5.71 -0.17 7.40 19.81
     
U.S. EQUITY    
      3 months 6 months 9 months 1 year 2 years 3 years 4 years 5 years
  5th percentile   8.85 24.35 32.05 41.41 29.11 23.58 21.91 22.79
  1st quartile   6.57 21.52 26.71 36.08 26.01 20.84 18.06 19.16
  Median   5.62 20.65 25.13 33.83 24.64 19.90 17.12 17.50
  3rd quartile   4.78 19.32 23.18 31.66 23.41 18.35 16.09 16.90
  95th percentile   2.75 14.59 20.87 26.98 20.04 16.07 14.43 15.65
  S&P 500 (C$)   5.82 20.72 24.46 32.59 24.06 19.78 17.36 18.00
         
INTERNATIONAL EQUITY (EUROPE AND ASIA)         
      3 months 6 months 9 months 1 year 2 years 3 years 4 years 5 years
  5th percentile   6.59 17.05 32.09 37.71 24.01 16.10 14.81 17.41
  1st quartile   5.70 14.98 25.24 29.19 21.86 13.96 12.86 15.28
  Median   4.52 14.28 23.39 26.94 19.95 13.03 11.72 14.39
  3rd quartile   3.38 13.04 21.08 23.06 18.79 11.49 10.14 12.97
  95th percentile   2.00 10.73 16.65 17.50 15.19 9.58 8.84 12.07
  MSCI EAFE (C$)   4.57 14.27 24.21 27.72 20.18 11.83 10.31 13.02
         
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   8.57 22.65 33.99 44.72 31.57 19.95 18.67 22.30
  1st quartile   7.15 18.58 26.22 32.14 23.55 18.63 15.81 17.81
  Median   5.36 17.07 23.64 29.16 21.50 15.79 14.63 16.52
  3rd quartile   4.37 15.27 20.60 25.41 20.22 13.86 12.30 15.71
  95th percentile   2.69 12.71 18.04 21.13 17.19 10.69 10.07 13.66
  MSCI World (C$)   5.19 17.43 23.78 29.36 21.27 14.97 13.39 15.22
               
EMERGING MARKETS               
      3 months 6 months 9 months 1 year 2 years 3 years 4 years 5 years
  5th percentile   5.91 12.32 15.40 11.72 11.86 9.00 7.15 15.06
  1st quartile   4.66 10.54 13.60 8.44 7.22 5.01 7.06 14.59
  Median   3.78 9.09 11.94 7.47 6.30 2.93 5.15 13.00
  3rd quartile   2.99 7.54 9.63 3.48 5.24 1.54 4.15 11.65
  95th percentile   2.00 5.10 5.57 -0.41 3.51 0.54 3.07 10.08
  MSCI Emerging Markets 3.50 8.98 12.45 7.48 5.72 1.66 4.57 11.85

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 Inc.

For further information:

Nathan Gibson
Corporate Communications
T: 416-390-2641
ngibson@morneaushepell.com