Diversified pooled fund managers saw a median return of three per cent before management fees in the first quarter of the year, according to findings from Morneau Shepell Ltd.
The benchmark portfolio used by many pension funds yielded a 3.1 per cent return during the same period. Morneau Shepell surveyed 330 pooled funds managed by nearly 51 investment management firms. The funds have a market value of more than $286 billion.
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Managers obtained a median return of 1.4 per cent on Canadian bonds, or 0.2 per cent above the benchmark. During that period, long-term bonds achieved a return of 1.9 per cent; medium-term bonds 1.5 per cent; and short-term bonds 0.7 per cent. High-yield bonds posted 3.2 per cent and real return-bonds delivered minus 1.3 percent.
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As for Canadian equities, managers achieved a median return of 2.2 per cent, or 0.2 per cent below the benchmark. During the quarter, the S&P/TSX Small Cap Index increased by 1.5 per cent; the S&P/TSX Completion Index increased by 2.3 per cent; and the S&P/TSX 60 Index increased by 2.4 per cent.
Managers beat the benchmarks for U.S. equities (5.2 per cent versus 5.1 per cent for the S&P 500 Index); international equities (6.9 per cent versus minus 6.7 per cent for the MSCI EAFE Index), global equities (5.9 per cent versus 5.8 per cent for the MSCI World Index) and emerging markets equities (11.4 per cent versus 10.9 per cent for the MSCI Emerging Markets Index).
“The Canadian market, which largely outperformed in 2016 with a 21.1 per cent return, slightly underperformed the other markets in the first quarter, with the S&P/TSX index up 2.4 per cent. Bonds yields were also positive, with the median manager performance for universe bond mandates at 1.4 per cent in the first quarter,” said Jean Bergeron, partner responsible for Morneau Shepell’s asset and risk management consulting team.