Pooled pension fund managers bounced back in the first quarter of 2019, posting a median return before management fees of 8.3 per cent, up from the negative 5.6 per cent return they posted in the final quarter of 2018, according to Morneau Shepell Ltd.’s latest data.
However, the firm’s pension performance universe came in 0.4 per cent under its benchmark portfolio, with a 55 per cent equity and 45 per cent fixed income allocation.
During the quarter, the FTSE Canada universe bond index posted a return of 3.9 per cent, which was in line with actual returns from managers.
Read: Pooled fund pension managers post negative return for Q4 2018
As for equities, the S&P/TSX composite index rose 13.3 per cent but Canadian equity managers underperformed, seeing a return of 12.2 per cent. U.S. equities fared similarly well, with the S&P 500 index yielding a 13.6 per cent return in U.S. dollars, while returns were muted in Canadian dollars to 11.3 per cent due to its appreciation against the U.S. currency. U.S. equity managers underperformed slightly, posting 11.1 per cent.
Meanwhile, developed markets in general posted double digit returns, with the the MSCI world developed markets index providing a 10 per cent return, which managers underperformed, with a return of 9.4 per cent. Emerging markets also saw strong gains: the MSCI emerging markets index returned 7.6 per cent and managers actually outperformed somewhat, posting an 8.2 per cent return.
“Pension fund solvency liability was up during the quarter due to a decrease in interest rates,” said Jean Bergeron, vice-president of Morneau Shepell’s asset and risk management consulting team. “However, given the high returns for the period, pension fund financial positions on a solvency basis improved. The solvency ratio for a pension plan with an average maturity has improved by about 1.5 to three per cent since the beginning of the year.”
Read: Ontario DB plans’ solvency drops in last quarter of 2018: FSCO