Diversified pooled fund managers had a positive second quarter of 2020, posting a median return of 11 per cent before management fees, according to the Morneau Shepell universe of pension manager’s pooled funds.
Despite the strong results, the return was 1.2 per cent lower than the benchmark portfolio used by many pension plans. Further, the median year-to-date return was still a negative 0.8 per cent.
“The dramatic fall in equity and credit prices in the first quarter of 2020 was sharply reversed this following quarter as the easing of COVID-19 lockdowns and early signs of an economic recovery supported both markets,” said Jean Bergeron, partner in the asset and risk management consulting team at Morneau Shepell Ltd., in a press release. “The speed and magnitude of both the first-quarter sell-off and the subsequent rebound have been unprecedented.”
Managers saw a median return of 6.6 per cent for Canadian bonds in the second quarter, beating the benchmark index by 0.7 per cent. And the median return for Canadian equity managers was 12.3 per cent, which was 4.7 per cent lower than the return for the S&P/TSX index.
“The second-quarter reversal has improved pension fund financial positions given the positive returns,” Bergeron said. “However, the higher solvency liability caused by the decrease in interest rates means that pension fund financial positions fell by an average of three per cent to 10 per cent compared to the beginning of the year.”