The current market environment isn’t like a regular market correction, but more like a natural disaster, says Joseph Connolly, vice-president of asset and risk management at Morneau Shepell Ltd.

In the current context, investors should be doing more monitoring and looking at more timely data because mid-month or mid-quarter results may be stale. “We’re definitely recommending increasing performance monitoring activities at least until the market volatility stabilizes.”

As such, he’s encouraging pension plan decision-makers to meet more regularly and have off-cycle meetings to discuss investment considerations, like asset allocation, manager performance and rebalancing decisions. “All these things really have to be looked at more frequently and you want to ensure from a governance perspective that boards can meet more regularly during these difficult times.”

Connolly also notes that certain managers’ performances in the face of the crisis have been surprising. In particular, momentum, quality and growth managers have offered protection on the downside. “Usually you see the opposite, that those are the managers that get hurt by a correction.”

On the flipside, he adds, many of the managers that had been recently lagging in up-markets while promising downside protection — particularly the deep value, value and dividend managers — didn’t deliver as expected.

It will be important to take a serious look at these managers and see how they’ve delivered relative to their peers. “We need to understand the reason for the underperformance and assess if the manager can rebound more than the others once the markets recover because they were already behind going into this market.”

Connolly highlights a number of factors to explain why certain manager styles didn’t perform as expected,. “Normally, when you see a downturn in the market, you’re looking at value managers to protect you, looking for stable managers that have real assets.”

But the current changes in the market have seen a dramatic shift to remote working in a short period of time. In this difficult environment, companies that have been able to reinvent themselves or were already in the technology space are the ones doing well. “Because, at the end of the day, whenever everyone runs for the hills then you really want to look at the quality companies that will sustain this massive change in the economy,” he says.

And while monitoring is key, there’s still so much uncertainty, so it’s important to avoid making any big changes right now, Connolly adds.

“At this stage, I think the data is changing very quickly and . . . there are some very large market fluctuations. We go from a 10 per cent change one day to a negative 10 per cent the next day. And with that, we have to be mindful that we don’t become counterproductive and make a change only to see it reversed a few days later.”

If a pension plan sponsor is forced to make changes because of liquidity, paying benefit lump sums or re-investing cash, Connolly advises they make these changes gradually.

“You don’t want to pick any one day where there could be a massive change in the market either to the positive or to the negative. You want to phase it in and make those moves over, maybe, a few weeks, if not even a few months.”