Morneau Shepell releases the results of its Performance Universe of Pension Managers' Pooled Funds

Pension funds wrap up 2016 with positive returns

TORONTO, Jan. 26, 2017 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the fourth quarter of 2016.

According to the report, in the fourth quarter of 2016, diversified pooled fund managers posted a median return of 1.4 per cent before management fees. For 2016 as a whole, the median return was 8.0 per cent.

"The market's strong fourth-quarter performance resulted in positive pension fund returns. Once again, Canadian equities had strong growth, with the S&P TSX Index posting 4.5 per cent in the fourth quarter and 21.1 per cent for the year.  U.S. equities also ended the year strongly, with the S&P 500 Index posting 6.3 per cent in the fourth quarter and 8.6 per cent for the year," said Jean Bergeron, Partner responsible for Morneau Shepell's Asset and Risk Management consulting team.

"Furthermore, interest rates rose significantly in the fourth quarter, which had a negative impact on bond yields; the median manager performance for Universe bond mandates was negative 3.2 per cent in the fourth quarter and 2.3 per cent for the year.  The higher interest rates, however, reduced solvency liability, so that on a solvency basis pension fund financial positions improved during the quarter," added Bergeron.

On average, during the fourth quarter of 2016, diversified pooled fund managers outperformed the benchmark. In fact, the median return (1.4 per cent) for these managers was 1.6 per cent higher than the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) return  (negative 0.2 per cent) used by many pension funds. For the full year, the median manager added 0.2 per cent to the benchmark return with a median return of 8.0 per cent while the benchmark produced a return of 7.8 per cent.

Canadian bonds
In the fourth quarter of 2016, managers obtained a median return of negative 3.2 per cent on bonds (Universe mandate), which was 0.2 per cent above the benchmark index. For 2016 as a whole, managers posted a median return of 2.3 per cent (Universe mandate), which was 0.6 per cent higher than the benchmark.

For the year 2016, long-term bonds posted a return of 2.5 per cent, while the return for medium-term bonds was 1.6 per cent and for short-term bonds 1.0 per cent. High-yield bonds posted 16.9 per cent, while real return bonds provided a 2.9 per cent return.

Canadian equities
During the fourth quarter of 2016, the median return for Canadian equity managers was 4.6 per cent, which is 0.1 per cent higher than the 4.5 per cent achieved by the S&P/TSX Index. The median year-to-date return for Canadian equity managers was 18.1 per cent, which is 3.0 per cent below the 21.1 per cent return by the S&P/TSX Index.

During 2016, the S&P/TSX Small Cap Index increased by 38.5 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks rose 20.5 per cent, and the large-cap S&P/TSX 60 Index posted gains of 21.4 per cent.

Foreign equities
Foreign equity managers' median returns and appropriate benchmark indices for the full year of 2016 are as follows:

• 7.1 per cent for U.S. equities versus 8.6 per cent for the S&P 500 Index (C$);
• Negative 2.2 per cent for international equities versus negative 2.5 per cent for the MSCI EAFE Index (C$);
• 3.4 per cent for global equities versus 3.8 per cent for the MSCI World Index (C$);
• 7.5 per cent for emerging markets equities versus 7.7 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments
The Dow Jones Credit Suisse Hedge Fund Index (formerly CSFB/Tremont Hedge Fund Index) posted a return of 3.5 per cent (C$) for the fourth quarter of 2016 and negative 1.8 per cent (C$) for 2016 as a whole.

The Performance Universe covers about 339 pooled funds managed by nearly 50 investment management firms. The pooled funds included in the Universe have a market value of more than $282 billion.

The results of Morneau Shepell's study are based on the returns provided by leading portfolio managers, ranging from independent investment management firms to insurance companies, trust companies and financial institutions. The returns are calculated before deduction of management fees.

The quarterly Performance Universe results are produced by the Asset & Risk Management consulting team at Morneau Shepell. This team provides independent consulting services on all aspects of asset and liability management of pension funds, endowment funds, and other institutional investment funds.

About Morneau Shepell
Morneau Shepell is the only human resources consulting and technology company that takes an integrative approach to employee assistance, health, benefits, and retirement needs. The Company is the leading provider of employee and family assistance programs, the largest administrator of pension and benefits plans and the largest provider of integrated absence management solutions in Canada. Through health and productivity, administrative and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity and improve their competitive position. Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations in North America.  With almost 4,000 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States, and around the globe. Morneau Shepell is a publicly traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.

		Summary
Rates of return for periods ending December 31, 2016 (annualized returns beyond one year)
Diversified
				3 months	6 months	9 months		1 Year	2 years	3 years	4 years		5 years
	5th percentile			5.50	10.99	13.42		13.87	8.67	9.79	12.45		12.39
	1st quartile			3.29	7.98	10.56		10.61	7.32	8.81	10.70		10.73
	Median			1.40	5.47	8.06		7.98	6.42	8.07	10.08		9.94
	3rd quartile			0.52	4.36	6.96		6.50	5.98	7.29	9.49		9.32
	95th percentile			-0.39	2.39	4.94		4.35	4.78	6.51	7.46		7.08
	Benchmark*			-0.22	3.85	7.51		7.81	5.78	7.91	8.41		8.28
	Benchmark**			0.25	4.55	8.19		8.33	6.04	8.07	8.85		8.69
	*     45% fixed income,55% equity
	**   40% fixed income,60% equity
	Returns compounded quarterly
Money market
				3 months	6 months	9 months	1 Year		2 years	3 years	4 years		5 years
	5th percentile			0.25	0.53	1.03	1.43		1.76	1.75	1.21		1.25
	1st quartile			0.23	0.48	0.76	1.02		1.06	1.11	1.12		1.15
	Median			0.21	0.43	0.69	0.91		0.93	1.01	1.05		1.09
	3rd quartile			0.17	0.36	0.65	0.84		0.87	0.93	0.96		1.01
	95th percentile			-0.26	0.14	0.48	0.63		0.68	0.79	0.85		0.89
Canadian bonds
				3 months	6 months	9 months	1 Year		2 years	3 years	4 years		5 years
	5th percentile			1.48	5.69	9.84	12.57		5.81	7.84	5.79		7.36
	1st quartile			-1.95	-0.08	2.17	3.98		3.45	5.55	4.09		4.47
	Median			-3.19	-1.78	1.05	2.56		3.08	4.91	3.64		3.92
	3rd quartile			-3.51	-2.32	0.57	2.10		2.69	4.64	3.24		3.52
	95th percentile			-7.35	-5.10	-0.20	1.56		2.35	3.54	2.65		2.98
Canadian bonds (Universe mandate)
				3 months	6 months	9 months	1 Year		2 years	3 years	4 years		5 years
	5th percentile			-2.23	-0.73	2.09	3.27		3.46	5.39	3.98		4.19
	1st quartile			-3.11	-1.63	1.12	2.55		3.10	5.03	3.66		3.95
	Median			-3.24	-1.87	0.79	2.29		2.87	4.72	3.41		3.67
	3rd quartile			-3.42	-2.23	0.47	1.89		2.60	4.61	3.21		3.39
	95th percentile			-3.83	-2.54	-0.08	1.41		2.36	4.44	2.92		3.16

Rates of return for periods ending December 31, 2016 (annualized returns beyond one year)
Mortgages
				3 months	6 months	9 months	1 Year		2 years	3 years	4 years	5 years
	5th percentile			0.43	1.36	2.27	2.75		3.19	4.07	4.01	3.94
	1st quartile			0.28	1.19	2.14	2.70		3.14	3.98	3.87	3.80
	Median			0.09	0.97	1.97	2.65		3.07	3.87	3.69	3.62
	3rd quartile			-0.09	0.76	1.80	2.59		3.00	3.75	3.52	3.45
	95th percentile			-0.24	0.59	1.67	2.55		2.94	3.66	3.38	3.31
Canadian equity – Broad*
				3 months	6 months	9 months		1 Year	2 years	3 years	4 years	5 years
	5th percentile			9.77	18.02	22.60		28.67	8.70	10.84	14.95	14.48
	1st quartile			5.91	12.00	16.14		21.47	7.42	9.12	11.93	11.68
	Median			4.61	10.63	14.50		18.14	6.65	8.01	10.91	10.70
	3rd quartile			3.50	9.00	12.84		16.44	5.70	6.97	9.02	9.32
	95th percentile			2.36	7.45	9.80		14.49	4.46	5.53	6.94	7.82
	S&P/TSX			4.54	10.24	15.82		21.08	5.36	7.06	8.52	8.25
	S&P/TSX Capped			4.54	10.24	15.82		21.08	5.36	7.06	8.52	8.25
	*     Some funds may include up to 30% in foreign content
Canadian equity - Specialized
				3 months	6 months	9 months		1 Year	2 years	3 years	4 years	5 years
	5th percentile			10.59	13.34	25.00		30.77	14.28	14.79	19.95	18.07
	1st quartile			7.38	11.57	20.75		24.64	10.34	9.36	14.26	12.96
	Median			2.45	8.44	18.50		21.92	7.83	6.84	10.77	12.15
	3rd quartile			0.82	6.96	15.70		15.97	5.14	5.16	10.12	9.69
	95th percentile			-0.78	5.49	13.93		13.92	2.91	1.55	7.28	6.88
	S&P/TSX Small Cap			3.12	8.21	27.61		38.48	9.56	5.44	5.98	4.28
	BMO Small Cap weighted			3.03	9.63	25.76		35.38	8.06	5.27	5.89	5.19
U.S. equity
				3 months	6 months	9 months		1 Year	2 years	3 years	4 years	5 years
	5th percentile			8.99	17.23	20.11		14.40	16.56	19.28	25.25	23.01
	1st quartile			6.91	12.29	14.73		10.31	15.00	17.70	23.12	21.89
	Median			5.67	10.21	12.69		7.10	13.95	16.47	22.54	20.74
	3rd quartile			4.02	8.29	10.54		4.45	11.63	15.18	21.54	19.62
	95th percentile			1.23	6.64	8.85		1.60	6.96	10.70	18.38	16.73
	S&P 500 (C$)			6.28	12.08	14.21		8.62	14.62	17.67	23.23	21.21

Rates of return for periods ending December 31, 2016 (annualized returns beyond one year)
International equity (Europe and Asia)
					3 months	6 months	9 months	1 Year	2 years	3 years	4 years	5 years
	5th percentile				5.22	13.34	12.09	7.47	15.87	12.63	17.36	17.93
	1st quartile				1.43	10.24	8.58	-1.07	9.63	8.40	13.50	14.97
	Median				0.12	7.57	6.54	-2.16	8.38	6.93	12.47	13.08
	3rd quartile				-2.06	5.49	4.53	-3.10	7.26	6.13	11.66	12.68
	95th percentile				-5.33	0.39	1.17	-6.52	6.14	5.22	10.49	12.02
	MSCI EAFE (C$)				1.31	9.12	7.96	-2.49	7.70	6.34	12.03	12.56
Global equity (U.S.A., Europe and Asia)
					3 months	6 months	9 months	1 Year	2 years	3 years	4 years	5 years
	5th percentile				6.33	16.13	15.98	13.24	16.24	15.83	21.71	20.70
	1st quartile				4.00	11.02	11.91	7.06	12.91	13.49	18.53	18.08
	Median				2.26	7.49	9.56	3.37	11.12	11.66	17.33	17.02
	3rd quartile				0.66	6.02	7.63	1.01	9.79	10.43	16.31	15.82
	95th percentile				-2.45	2.43	5.73	-1.40	7.80	7.69	13.72	13.31
	MSCI World (C$)				3.93	10.29	11.86	3.79	11.08	12.18	17.53	16.66
Emerging markets
					3 months	6 months	9 months	1 Year	2 years	3 years	4 years	5 years
	5th percentile				0.00	10.65	14.73	16.54	9.25	10.04	9.52	11.50
	1st quartile				-1.48	9.26	12.00	9.89	7.57	8.73	7.56	9.68
	Median				-2.37	8.54	11.55	7.46	6.92	7.70	6.54	8.59
	3rd quartile				-3.53	3.39	7.18	5.78	5.93	6.19	4.94	7.31
	95th percentile				-5.85	1.09	5.68	3.21	3.80	4.36	3.20	5.41
	MSCI Emerging markets				-2.13	8.11	9.41	7.74	5.05	5.71	5.35	7.40

The information herein has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does Morneau Shepell Asset & Risk Management Ltd. ("MS ARM") or its affiliates ("Morneau Shepell") assume any responsibility or liability. MS ARM or Morneau Shepell is not liable for any errors or omissions in the information or for any loss or damage suffered. Where such statements are based in whole or in part on information provided by third parties, they are not guaranteed to be accurate or complete. The information does not provide individual financial, legal, tax or investment advice and is for information purposes only.

SOURCE Morneau Shepell Inc.

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Cathren Ronberg, Director, Corporate Communications, 416.355.5632, [email protected]; Jean Bergeron, FSA, FCIA, CFA, Partner, 514.392.7852, [email protected]

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