Canadian diversified pooled fund managers offering services to pension funds and other institutional investors posted a median return of 0.8% before management fees in the third quarter of 2014. That return was 0.2% below the benchmark portfolio (with an allocation of 55% in equity and 45% in fixed income) used by many pension funds.
This is according to Morneau Shepell’s Performance Universe of Pension Managers’ Pooled Funds.
“The Canadian stock market and most foreign markets edged lower while the U.S. stock market kept rising in the third quarter,” notes Jean Bergeron, partner and team leader of Morneau Shepell’s asset and risk management consulting team.
A decrease in interest rates led to positive returns in the bond market and this market performance kept pension fund returns in positive territory for the quarter, Bergeron adds.
Given the decrease in interest rates used to discount pension benefits, the solvency liability of an average pension fund was up about 3.1% in the third quarter. “Pension fund financial positions have thus deteriorated this quarter and since the beginning of the year,” Bergeron explains.
The Performance Universe covers about 360 pooled funds managed by nearly 50 investment management firms. The pooled funds included in the Universe have a market value of more than $250 billion.
The results of Morneau Shepell’s study are based on the returns provided by different portfolio managers.
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