It’s no surprise that Canadian pension funds had a rough first quarter of 2020 and the latest data from Morneau Shepell Ltd.’s universe of pension managers’ pooled funds confirms just that.
During the quarter, diversified pooled fund managers saw a median return of negative 10 per cent before management fees, which was 0.9 per cent lower than the benchmark portfolio used by many pension funds, according to the report.
“Stock markets experienced a strong correction in the first quarter following the COVID-19 crisis and the oil dispute,” said Jean Bergeron, vice-president of Morneau Shepell’s asset and risk management consulting team, in a press release. “These events generated significant volatility in the stock and bond markets.”
In particular, the bond market saw a positive return of 1.6 per cent, whereas the Canadian equity S&P/TSX composite index posted a return of negative 20.9 per cent. Also dismal, the U.S. S&P 500 index returned negative 12.2 per cent in Canadian dollars, the MSCI world global markets index returned negative 13.3 per cent and the emerging markets index returned negative 16. 9 per cent.
“The current crisis is having a significant impact on pension fund financial positions,” said Bergeron. “The negative returns and the higher solvency liability caused by the decrease in interest rates means that pension fund financial positions fell by an average of eight per cent to 16 per cent.”