Strong growth and equity markets have helped to boost the performance of pooled fund managers to a median return of 8.6 per cent before management fees in 2017, according to a new report from Morneau Shepell Ltd.

The results reflect about 324 pooled funds from almost 50 investment management firms with a combined market value of $262 billion. For the fourth quarter of 2017, the median return of diversified pooled fund managers was 3.9 per cent.

“Stimulated by strong and synchronized global economic growth, stock markets rose to record levels in 2017,” said Jean Bergeron, a partner responsible for Morneau Shepell’s asset and risk management consulting team, in a press release.

“The Canadian stock market did not do as well as in 2016 but still grew 9.1 per cent. U.S. equities continued to perform well and the S&P 500 index posted a 13.8 per cent return in Canadian dollars. Emerging market equities outperformed all others equity markets, with the MSCI emerging markets index returning 28.7 per cent in Canadian dollars. Bond returns were modest in 2017, at about three per cent for the market as a whole.”

With a strong performance across equity markets, pension plans saw a boost in solvency levels, Bergeron noted. “The solvency ratio for an average pension plan improved by five to seven per cent during the year,” he said.
During the fourth quarter, however, diversified pooled fund managers underperformed by 0.5 per cent relative to the 4.4 per cent return of the benchmark portfolio, containing 55 per cent equity and 45 per cent fixed income.

Domestically, managers in the fourth quarter of 2017 delivered a median return of two per cent on bonds, directly in line with the benchmark. For the full year, managers beat the benchmark by 0.4 per cent to achieve a median return of 2.9 per cent. In 2017, long-term bonds posted the highest return at seven per cent. High-yield bonds posted a 9.9 per cent return, with real-return bonds at 0.7 per cent for the year.

On the equities side, Canadian managers slightly underperformed the 4.5 per cent achieved by the S&P/TSX index in the final quarter of 2017. For the entire year, however, managers slightly outperformed the benchmark by 0.2 percentage points.

Read: High-dividend REITs a good alternative to fixed income: report

Copyright © 2020 Transcontinental Media G.P. Originally published on

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