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

Pension funds kick off 2017 with positive returns

TORONTO, April 24, 2017 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the first quarter of 2017.

According to the report, in the first quarter of 2017, diversified pooled fund managers posted a median return of 3.0 per cent before management fees.

"Stock markets made strong advances in the first quarter. Emerging market equities dominated with an impressive return of 10.9 per cent for the MSCI Emerging Markets Index (C$), while U.S. equities in the S&P 500 Index (C$) returned 5.1 per cent. 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.

"On a solvency basis, due to good returns and a decrease in the solvency liability, pension fund financial positions improved during the quarter," added Bergeron.

On average, during the first quarter of 2017, diversified pooled fund managers underperformed the benchmark. In fact, the median return (3.0 per cent) for these managers was 0.1 per cent lower than the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) return (3.1 per cent) used by many pension funds.

Canadian bonds
In the first quarter of 2017, managers obtained a median return of 1.4 per cent on bonds (Universe mandate), which was 0.2 per cent above the benchmark.

During the same period, long-term bonds posted a return of 1.9 per cent, while the return for medium-term bonds was 1.5 per cent and for short-term bonds 0.7 per cent. High-yield bonds posted 3.2 per cent, while real return bonds provided a negative 1.3 per cent return.

Canadian equities
In the first quarter of 2017, the median return for Canadian equity managers was 2.2 per cent, which is 0.2 per cent lower than the 2.4 per cent achieved by the S&P/TSX Index.

During the same period, the S&P/TSX Small Cap Index increased by 1.5 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks rose 2.3 per cent, and the large-cap S&P/TSX 60 Index posted gains of 2.4 per cent.

Foreign equities
Foreign equity managers' median returns and appropriate benchmark indices for the first quarter of 2017 are as follows:

• 5.2 per cent for U.S. equities versus 5.1 per cent for the S&P 500 Index (C$);
• 6.9 per cent for international equities versus negative 6.7 per cent for the MSCI EAFE Index (C$);
• 5.9 per cent for global equities versus 5.8 per cent for the MSCI World Index (C$);
• 11.4 per cent for emerging markets equities versus 10.9 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments
The Dow Jones Credit Suisse Hedge Fund Index (formerly CSFB/Tremont Hedge Fund Index) posted a return of 1.2 per cent (C$) for the first quarter of 2017.

The Performance Universe covers about 330 pooled funds managed by nearly 51 investment management firms. The pooled funds included in the Universe have a market value of more than $286 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, as well as the largest administrator of pension and benefits plans. 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 approximately 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 March 31, 2017 (annualized returns beyond one year)
Diversified
				3 months	6 months	9 months		1 year	2 years	3 years	4 years		5 years
	5th percentile			4.31	8.72	14.15		18.45	7.29	9.41	12.18		12.39
	1st quartile			3.38	6.29	11.17		14.09	5.77	8.35	10.18		10.61
	Median			3.00	4.40	8.93		11.73	5.16	7.45	9.75		9.60
	3rd quartile			2.52	3.56	7.64		10.15	4.36	7.02	9.05		9.03
	95th percentile			1.80	2.35	5.31		7.73	3.56	5.74	7.84		7.93
	Benchmark*			3.07	2.85	7.04		10.81	4.11	7.34	8.32		8.15
	Benchmark**			3.21	3.48	7.91		11.67	4.39	7.52	8.72		8.51
	*     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			0.83	0.63	1.02	1.84		1.40	2.07	1.19		1.24
	1st quartile			0.26	0.50	0.74	1.03		1.02	1.13	1.11		1.14
	Median			0.24	0.44	0.68	0.92		0.91	1.00	1.03		1.07
	3rd quartile			0.20	0.36	0.65	0.86		0.84	0.92	0.95		0.98
	95th percentile			0.15	0.26	0.48	0.63		0.63	0.76	0.82		0.87
Canadian bonds
				3 months	6 months	9 months	1 year		2 years	3 years	4 years		5 years
	5th percentile			2.23	3.33	7.35	11.42		4.84	6.75	5.88		6.65
	1st quartile			1.83	-0.56	1.31	3.68		2.12	4.91	4.31		4.67
	Median			1.53	-1.71	-0.34	2.58		1.66	4.40	3.77		4.09
	3rd quartile			1.37	-2.22	-1.00	2.01		1.28	4.11	3.36		3.78
	95th percentile			1.03	-5.72	-3.32	1.35		0.83	3.15	2.85		3.42
Canadian bonds (Universe mandate)
				3 months	6 months	9 months	1 year		2 years	3 years	4 years		5 years
	5th percentile			1.75	-0.30	1.51	3.38		2.18	4.85	4.15		4.39
	1st quartile			1.57	-1.54	-0.01	2.63		1.79	4.48	3.78		4.08
	Median			1.42	-1.83	-0.36	2.35		1.61	4.24	3.53		3.90
	3rd quartile			1.32	-2.15	-0.92	1.94		1.28	4.10	3.30		3.66
	95th percentile			1.23	-2.44	-1.22	1.31		1.11	3.87	3.13		3.46

Rates of return for periods ending March 31, 2017 (annualized returns beyond one year)
Mortgages
				3 months	6 months	9 months	1 year		2 years	3 years	4 years	5 years
	5th percentile			0.88	1.30	2.24	3.16		2.89	3.87	3.88	4.00
	1st quartile			0.88	1.15	2.07	3.03		2.77	3.77	3.76	3.88
	Median			0.88	0.97	1.86	2.86		2.61	3.65	3.62	3.73
	3rd quartile			0.87	0.79	1.65	2.70		2.46	3.53	3.48	3.57
	95th percentile			0.87	0.64	1.48	2.57		2.33	3.44	3.36	3.45
Canadian equity – Broad*
				3 months	6 months	9 months		1 year	2 years	3 years	4 years	5 years
	5th percentile			3.92	11.46	19.47		23.33	8.28	9.55	13.42	13.57
	1st quartile			2.70	8.49	14.58		18.74	6.90	7.90	11.22	11.10
	Median			2.17	7.06	13.42		17.21	6.11	7.08	10.29	9.99
	3rd quartile			1.37	5.65	11.65		15.20	4.84	5.23	8.49	8.72
	95th percentile			-0.30	4.49	9.35		12.77	3.70	4.36	7.39	7.49
	S&P/TSX			2.41	7.06	12.90		18.62	5.27	5.82	8.27	7.84
	S&P/TSX Capped			2.41	7.06	12.90		18.62	5.27	5.82	8.27	7.84
	*     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			3.28	12.35	15.01		24.34	14.74	13.20	18.39	16.69
	1st quartile			2.25	7.17	13.42		21.12	8.58	7.73	13.08	11.32
	Median			1.64	2.52	8.72		20.02	5.41	4.90	11.02	9.70
	3rd quartile			-2.23	0.87	6.30		17.47	3.82	3.67	9.12	8.24
	95th percentile			-4.65	-0.69	4.17		13.12	2.96	-0.82	6.10	5.05
	S&P/TSX Small Cap			1.47	4.64	9.80		29.48	10.51	3.29	6.20	3.38
	BMO Small Cap weighted			3.26	6.38	13.19		29.85	9.80	3.43	6.42	4.34
U.S. equity
				3 months	6 months	9 months		1 year	2 years	3 years	4 years	5 years
	5th percentile			8.85	15.91	25.29		28.18	13.77	19.12	23.95	22.00
	1st quartile			6.17	12.47	19.45		21.06	12.04	17.48	21.05	20.65
	Median			5.20	11.53	16.94		19.08	10.79	16.30	20.14	19.48
	3rd quartile			4.40	9.83	13.68		16.73	8.07	15.02	19.12	18.31
	95th percentile			2.97	7.89	11.23		15.75	7.07	10.92	16.86	16.29
	S&P 500 (C$)			5.14	11.74	17.84		20.09	11.95	17.41	21.04	20.03

Rates of return for periods ending March 31, 2017 (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				9.11	10.88	20.07	20.66	11.47	13.15	16.73	17.00
	1st quartile				7.74	9.38	18.47	16.03	5.90	9.20	13.69	14.35
	Median				6.92	7.29	15.20	14.84	4.47	7.83	12.50	12.46
	3rd quartile				6.28	4.19	12.63	11.11	3.38	7.11	11.67	12.01
	95th percentile				4.92	1.83	8.16	8.41	2.48	5.68	9.97	11.32
	MSCI EAFE (C$)				6.65	8.05	16.38	15.15	3.86	7.04	11.87	12.11
Global equity (U.S.A., Europe and Asia)
					3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile				9.50	11.95	22.73	23.76	12.60	15.46	20.27	19.49
	1st quartile				7.08	10.85	18.75	18.95	9.89	13.69	16.97	17.23
	Median				5.87	8.94	14.86	16.67	8.74	12.71	16.47	16.26
	3rd quartile				5.19	7.19	11.56	15.12	7.11	11.23	15.61	15.07
	95th percentile				3.94	4.84	8.17	11.38	5.56	8.50	12.40	12.61
	MSCI World (C$)				5.79	9.95	16.68	18.33	8.02	12.39	16.41	15.86
Emerging markets
					3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile				13.45	12.27	25.03	29.92	9.99	12.12	11.53	11.35
	1st quartile				12.01	9.66	22.55	25.71	8.30	11.47	9.78	9.69
	Median				11.37	8.65	20.75	23.94	7.32	10.24	8.96	8.52
	3rd quartile				10.86	5.42	14.39	18.42	6.17	8.27	6.90	6.98
	95th percentile				8.03	3.89	8.64	15.83	4.00	6.98	5.69	5.43
	MSCI Emerging markets				10.87	8.51	19.86	21.31	4.59	8.16	7.99	7.18

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.

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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