Pooled pension fund managers see modest gains for Q3 2019

Diversified pooled fund managers posted a median 1.5 per cent return before fees for the third quarter of 2019, according to Morneau Shepell Ltd.’s latest pension universe.

The 1.5 per cent return represented a 0.3 per cent underperformance of its benchmark portfolio, which uses a 55 per cent equities and 45 per cent fixed income split. The returns mark a significant dip from the 8.3 per cent yields seen for the first quarter of the year.

“In general, markets posted positive returns in the third quarter, despite higher volatility,” said Jean Bergeron, vice-president responsible for the Morneau Shepell asset and risk management consulting team, in a press release.

Read: Pooled pension fund managers rebound in 2019

With regard to Canadian fixed income, managers posted a median return of 1.2 per cent, consistent with its benchmark.

“Although returns have been good since the year started, the decrease in interest rates has caused the solvency liability of many pension funds to increase at a faster pace than their assets,” added Bergeron. “This means that on a solvency basis, pension fund financial positions have decreased by about two to five per cent since the beginning of the year.”

For domestic equities, managers posted a 2.4 per cent return, lower by 0.1 per cent than the S&P/TSX index. Managers fared slightly better in U.S. equities, with a 2.5 per cent return, still lagging the 2.9 per cent posted by the S&P 500 index.

Internationally, managers saw 0.1 per cent returns for equities, just under the MSCI EAFE index benchmark of 0.2 per cent. Globals lagged their index with 0.9 per cent versus the 1.9 per cent gains from the MSCI World index. Emerging markets were the worst performer, with negative 2.1 per cent returns, technically beating the MSCI emerging markets index, which saw an even worse negative 2.8 per cent.

Read: Canadian DB plans increasingly focused on long-term goals, monitoring pension risk