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Morneau Shepell releases the results of its Performance Universe of Pension Managers' Pooled Funds for the fourth quarter of 2014
Pension/Retirement / Investment / Canada

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

Positive returns for pension funds in 2014

MONTREAL, Jan. 21, 2015 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the fourth quarter of 2014.

According to the report, in the fourth quarter of 2014, diversified pooled fund managers posted a median return of 2.1 per cent before management fees. Since the beginning of the year, the median return has been 10.8 per cent.

"The takeaway for 2014 is not so much that stock markets did well, but that there was a significant decrease in bond interest rates. This resulted in very high yields for bond portfolios, especially long-term bonds, with the FTSE TMX Canada Long-Term Bond Index returning 17.5% in 2014.  The lower interest rates, however, led to a significant increase in solvency liability. For pension funds, which are required by law to fund all solvency deficiencies, the increased liability means that their financial positions very probably deteriorated in 2014. Funds that do not have to finance a solvency deficiency could very well have improved their financial position during the year," said Jean Bergeron, Partner and responsible for the Morneau Shepell's Asset and Risk Management Consulting team.

On average, during the fourth quarter of 2014, diversified pooled fund managers outperformed the benchmark. In fact, the media return  (2.1 per cent) for these managers was 0.1 per cent above the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) used by many pension funds (2.0 per cent). For the full year, the median manager added 0.1 per cent to the benchmark return with a median return of 10.8 per cent while the benchmark produced a return of 10.7 per cent.

Canadian bonds

In the fourth quarter of 2014, managers obtained a median return of 2.6 per cent on bonds (Universe mandate) which was inferior to the benchmark FTSE TMX Canada Universe Bond Index return (2.7 per cent). For 2014 as a whole, managers posted a median return of 8.9 per cent which was 0.1 per cent above the benchmark.

For the whole year, long-term bonds posted a return of 17.5 per cent, while the return for medium-term bonds was 9.2 per cent and for short-term bonds 3.1 per cent. High-yield bonds achieved a return of 2.5 per cent, while real return bonds provided a 13.2 per cent return.

Canadian equities

During the fourth quarter of 2014, Canadian equity managers obtained a median return of -0.3 per cent, which is 1.2 per cent higher than the S&P/TSX Index (-1.5 per cent).

Since the beginning of 2014, Canadian equity managers obtained a median return of 10.9 per cent whereas the S&P/TSX Index produced a return of 10.6 per cent.

During that same period, the S&P/TSX Small Cap Index decreased by -2.3 per cent, whereas the S&P/TSX Completion Index that represents mid-cap stocks rose 5.7 per cent, and the large-cap S&P/TSX 60 Index posted gains of 12.3 per cent.

Foreign equities

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

  • 22.4 per cent for U.S. equities versus 24.0 per cent for the S&P 500 Index (C$)
  • 3.8 per cent for international equities versus 3.7 per cent for the MSCI EAFE Index (C$)
  • 12.3 per cent for global equities versus 14.4 per cent for the MSCI World Index (C$)
  • 8.2 per cent for emerging markets equities versus 7.0 per cent for the MSCI Emerging Markets Index (C$)

Alternative investments

The Dow Jones Credit Suisse Hedge Fund Index (previously CSFB/Tremont Hedge Fund Index) posted a return of 13.6 per cent (C$) for the year 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 20,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 3,500 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 December 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

 

4.46

5.46

8.17

13.20

16.93

15.25

12.21

11.96

 

1st quartile

 

2.87

4.12

7.22

12.32

14.47

12.99

9.87

10.03

 

Median

 

2.13

3.02

5.95

10.79

13.69

12.46

8.87

9.10

 

3rd quartile

 

1.61

1.71

4.66

9.37

12.68

11.12

7.83

8.21

 

95th percentile

 

-1.26

-1.26

2.34

6.78

7.69

7.77

4.83

6.41

 

Benchmark*

 

2.05

3.10

6.15

10.70

11.40

10.01

7.69

8.07

 

Benchmark**

 

2.00

3.05

6.18

10.89

12.12

10.60

7.91

8.29

                     
 

*     2% 91-day T-Bills. 43% FTSE TMX CANADA Universe. 27.5% S&P/TSX. 27.5% MSCI World (C$)

 

**  2% 91-day T-Bills. 38% FTSE TMX CANADA 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

 

0.33

0.68

1.03

1.40

1.44

1.46

1.45

1.33

 

1st quartile

 

0.31

0.62

0.93

1.25

1.23

1.24

1.26

1.17

 

Median

 

0.30

0.60

0.91

1.21

1.21

1.22

1.20

1.11

 

3rd quartile

 

0.27

0.55

0.82

1.11

1.14

1.15

1.16

1.07

 

95th percentile

 

0.23

0.51

0.76

1.02

1.03

1.05

1.06

0.98

 

FTSE TMX CANADA
T-Bill 91 days

0.22

0.47

0.68

0.91

0.96

0.98

0.98

0.89

               

Canadian bonds

             
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

5.05

7.49

11.52

17.28

5.62

7.50

8.33

9.28

 

1st quartile

 

2.72

3.88

6.05

9.35

4.67

5.14

6.44

7.08

 

Median

 

2.59

3.66

5.78

8.83

4.08

4.35

5.57

5.97

 

3rd quartile

 

2.06

2.84

5.07

8.22

3.65

3.80

5.24

5.66

 

95th percentile

 

-0.27

-0.07

0.86

3.57

2.59

2.55

4.60

5.20

 

FTSE TMX CANADA Universe

 

2.70

3.79

5.86

8.79

3.68

3.65

5.13

5.45

           

Canadian bonds (Universe mandate)

         
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

2.82

3.98

6.09

9.51

4.70

4.78

5.76

6.43

 

1st quartile

 

2.69

3.85

5.94

9.07

4.17

4.38

5.57

5.99

 

Median

 

2.62

3.72

5.81

8.90

3.87

4.14

5.43

5.77

 

3rd quartile

 

2.42

3.40

5.51

8.63

3.59

3.77

5.19

5.50

 

95th percentile

 

2.05

2.85

4.82

7.83

3.34

3.54

4.80

5.11

 

FTSE TMX CANADA Universe

 

2.70

3.79

5.86

8.79

3.68

3.65

5.13

5.45

 

Rates of return for periods ending December 31, 2014
(annualized returns beyond one year)

                 

Mortgages

               
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

1.48

2.65

4.29

5.81

4.77

4.39

4.87

5.57

 

1st quartile

 

1.47

2.44

3.93

5.48

4.33

4.00

4.63

5.27

 

Median

 

1.46

2.19

3.47

5.07

3.77

3.51

4.34

4.90

 

3rd quartile

 

1.42

2.15

3.36

4.86

3.59

3.40

4.30

4.75

 

95th percentile

 

1.39

2.13

3.27

4.70

3.45

3.30

4.26

4.63

 

FTSE TMX CANADA Mortgage Market

0.86

1.72

2.59

4.95

4.03

4.31

4.48

4.51

             

Canadian equity – Broad*

           
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

2.65

4.31

9.77

15.34

19.67

17.31

11.47

12.31

 

1st quartile

 

0.52

0.71

6.92

12.86

17.00

15.02

9.10

10.37

 

Median

 

-0.27

-0.96

5.06

10.93

15.19

13.24

7.11

8.80

 

3rd quartile

 

-2.63

-3.54

2.36

8.38

12.29

11.34

5.52

7.60

 

95th percentile

 

-5.25

-7.98

-0.55

3.22

7.89

7.57

2.83

5.68

 

S&P/TSX

 

-1.47

-2.05

4.24

10.55

11.77

10.22

5.15

7.53

 

S&P/TSX Capped

-1.47

-2.05

4.24

10.55

11.77

10.22

5.15

7.53

 

*     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

 

-0.12

-1.90

8.43

15.35

24.03

20.06

10.84

15.31

 

1st quartile

 

-2.67

-5.21

2.89

11.60

21.40

17.54

9.64

13.91

 

Median

 

-3.94

-7.57

-0.34

7.22

15.84

15.12

7.15

11.67

 

3rd quartile

 

-4.80

-8.75

-1.61

3.05

13.29

12.01

6.25

9.65

 

95th percentile

 

-6.80

-11.51

-6.85

-1.09

3.97

1.97

-2.66

4.79

 

S&P/TSX Small Cap

-8.72

-17.27

-9.53

-2.34

2.51

0.91

-3.74

3.01

 

BMO Small Cap weighted

-7.26

-15.44

-8.22

-0.09

3.76

3.32

-1.36

5.57

                 

U.S. equity

               
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

13.12

19.73

19.94

27.12

35.78

28.77

22.64

21.11

 

1st quartile

 

10.31

15.88

17.16

24.43

33.50

27.30

20.64

18.21

 

Median

 

9.33

14.53

15.58

22.42

31.69

25.73

19.72

17.43

 

3rd quartile

 

7.85

12.09

12.27

18.65

29.76

23.60

18.19

15.88

 

95th percentile

 

5.15

6.84

10.32

14.24

26.69

21.45

15.90

14.87

 

S&P 500 (C$)

 

8.69

15.38

17.19

24.00

32.48

25.82

20.09

17.76

                                     

 

Rates of return for periods ending December 31, 2014
(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

 

4.27

4.29

4.71

10.18

19.85

19.11

13.03

12.75

 

1st quartile

 

1.91

0.90

1.31

5.59

17.80

17.96

10.89

9.64

 

Median

 

0.64

-0.05

-0.64

3.80

16.54

16.65

9.31

8.05

 

3rd quartile

 

-0.13

-1.26

-1.79

2.55

14.97

15.77

8.59

7.46

 

95th percentile

 

-2.44

-3.58

-5.53

-0.35

12.31

12.72

6.98

6.24

 

MSCI EAEO (C$)

 

-0.06

-1.31

-0.87

3.66

16.54

15.93

8.83

7.46

           

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

 

8.18

11.34

11.29

17.43

28.09

25.16

18.35

16.76

 

1st quartile

 

5.68

8.21

9.29

14.67

25.54

22.26

15.97

14.49

 

Median

 

4.58

6.41

7.13

12.31

23.10

20.55

14.54

12.93

 

3rd quartile

 

2.66

4.10

4.38

10.28

21.49

19.02

12.48

11.46

 

95th percentile

 

1.36

0.96

0.98

7.16

19.26

17.13

10.46

9.96

 

MSCI Monde (C$)

 

4.69

7.47

8.74

14.39

24.35

20.54

14.11

12.42

                 

Emerging markets

               
     

3 months

6 months

9 months

1 year

2 years

3 years

4 years

5 years

 

5th percentile

 

2.32

4.08

8.54

14.12

11.38

15.12

8.15

7.16

 

1st quartile

 

-0.27

2.11

6.35

9.96

8.63

10.97

4.59

6.47

 

Median

 

-0.98

0.48

3.71

8.21

5.79

9.79

3.55

4.59

 

3rd quartile

 

-1.70

-1.03

2.17

5.39

3.76

7.28

1.58

3.66

 

95th percentile

 

-3.36

-2.40

0.92

4.19

1.34

6.59

0.98

3.31

 

MSCI Emerging markets

-0.96

0.42

3.41

7.03

5.65

8.99

2.08

4.16

                     
                           

 

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 - Investment

For further information: Nathan Gibson, Corporate Communications, 416-390-2641, ngibson@morneaushepell.com