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

Pension funds post positive second-quarter returns

TORONTO, July 30, 2018 /CNW/ - Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers' Pooled Funds for the second quarter of 2018.

According to the report, in the second quarter of 2018, diversified pooled fund managers posted a median return of 2.9 per cent before management fees.

"Most stock markets delivered excellent results in the second quarter, generating positive pension fund returns. Canadian and U.S. equities did particularly well, with returns of 6.8 per cent for the S&P/TSX and 5.6 per cent in Canadian dollars for the S&P 500. Emerging equities had a tough quarter, returning -6.0 per cent in Canadian dollars. Bond returns were modest in the second quarter, at about 0.5 per cent for the market as a whole," said Jean Bergeron, vice-president responsible for the Morneau Shepell Asset & Risk Management consulting team.

"With returns well above the increase in actuarial liability, pension fund financial positions on a solvency basis improved for the second quarter of 2018. The solvency ratio for an average pension plan has improved by about 1.3 to 1.9 per cent since the beginning of the year," added Bergeron.

On average, during the second quarter of 2018, diversified pooled fund managers obtained a median return of 2.9 per cent, which was equal to the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) used by many pension funds.

Canadian bonds

In the second quarter of 2018, managers obtained a median return of 0.5 per cent on bonds (Universe mandate), which was equal to the benchmark index.

During the same period, long-term bonds posted a return of 0.9 per cent, while the return for medium-term bonds was 0.2 per cent and for short-term bonds 0.3 per cent. High-yield bonds posted 1.3 per cent, while real return bonds provided a 2.0 per cent return.

Canadian equities

In the second quarter of 2018, the median return for Canadian equity managers was 6.2 per cent, which is 0.6 per cent lower than the 6.8 per cent achieved by the S&P/TSX Index.

During the same period, the S&P/TSX Small Cap Index rose by 6.6 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks registered an increase of 5.8 per cent, and the large-cap S&P/TSX 60 Index growth of 7.1 per cent.

Foreign equities

Foreign equity managers' median returns and appropriate benchmark indices in the second quarter of 2018 are as follows:

• 5.3 per cent for U.S. equities versus 5.6 per cent for the S&P 500 Index (C$);
  
  
• 0.2 per cent for international equities versus 0.8 per cent for the MSCI EAFE Index (C$);
  
  
• 3.0 per cent for global equities versus 3.8 per cent for the MSCI World Index (C$);
  
  
• Negative 5.1 per cent for emerging markets equities versus negative 6.0 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 2.2 per cent (C$) for the second quarter of 2018.

The Performance Universe covers about 336 pooled funds managed by nearly 51 investment management firms. The pooled funds included in the Universe have a market value of more than $268 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 Inc.
Morneau Shepell is the only human resources consulting and technology company that takes an integrated 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 retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. As a leader in strategic HR consulting and innovative pension design, the Company helps clients solve complex workforce problems and provides integrated productivity, health and retirement solutions. Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations. With more than 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 June 30, 2018 (annualized returns beyond one year)
Diversified
				3 months	6 months	9 months		1 year	2 years	3 years	4 years		5 years
	5th percentile			4.41	4.12	8.69		10.71	12.51	8.05	9.12		11.78
	1st quartile			3.45	2.68	7.07		8.15	9.52	7.16	7.39		9.79
	Median			2.93	2.22	6.23		7.38	8.26	6.47	6.81		9.35
	3rd quartile			2.49	1.71	5.47		6.50	7.64	5.87	6.30		8.90
	95th percentile			1.75	0.55	3.59		4.63	6.14	4.89	4.96		7.63
	Benchmark*			2.89	2.17	6.68		6.79	7.50	6.12	6.60		8.62
	Benchmark**			3.08	2.30	6.90		7.29	8.12	6.40	6.81		8.98
	*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			0.46	0.82	1.23	1.44		1.27	1.21	1.56		1.62
	1st quartile			0.42	0.79	1.14	1.39		1.17	1.12	1.15		1.15
	Median			0.40	0.77	1.10	1.32		1.14	1.03	1.07		1.09
	3rd quartile			0.36	0.69	0.98	1.19		0.94	0.94	0.99		0.99
	95th percentile			0.28	0.54	0.88	0.83		0.64	0.77	0.82		0.86
Canadian bonds
				3 months	6 months	9 months	1 year		2 years	3 years	4 years		5 years
	5th percentile			1.26	1.56	6.49	3.88		5.60	5.06	5.71		6.41
	1st quartile			0.72	0.91	3.16	1.82		1.70	3.20	3.90		4.52
	Median			0.55	0.77	2.76	1.23		1.08	2.41	3.34		3.95
	3rd quartile			0.46	0.59	2.52	0.89		0.73	2.22	3.07		3.64
	95th percentile			0.33	0.38	1.35	0.53		0.33	1.82	2.37		3.36
Canadian bonds (Universe mandate)
				3 months	6 months	9 months	1 year		2 years	3 years	4 years		5 years
	5th percentile			0.74	0.99	3.20	1.87		1.97	2.78	3.64		4.14
	1st quartile			0.62	0.84	2.89	1.28		1.12	2.47	3.42		3.95
	Median			0.54	0.75	2.72	0.95		0.89	2.31	3.20		3.72
	3rd quartile			0.48	0.59	2.54	0.78		0.57	2.14	3.03		3.56
	95th percentile			0.36	0.44	2.27	0.53		0.28	1.95	2.87		3.42

Rates of return for periods ending June 30, 2018 (annualized returns beyond one year)
Canadian equity – Broad*
				3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile			7.66	4.46	10.10	16.36	17.35	10.11	8.16	12.34
	1st quartile			6.90	3.03	8.04	12.00	12.48	8.77	6.87	11.18
	Median			6.19	2.11	6.43	9.98	11.16	7.35	6.25	10.48
	3rd quartile			5.44	1.03	4.77	8.34	10.08	6.62	4.83	9.67
	95th percentile			3.42	-0.93	2.23	4.99	7.44	5.68	3.06	7.37
	S&P/TSX			6.77	1.95	6.48	10.41	10.73	6.96	4.87	9.24
	S&P/TSX Capped			6.77	1.95	6.48	10.41	10.73	6.96	4.87	9.24
	* 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			7.41	6.34	12.81	16.89	12.10	13.39	11.07	16.73
	1st quartile			4.95	2.32	10.06	9.40	10.28	6.43	5.19	13.36
	Median			4.32	-2.68	4.59	6.60	6.02	4.65	2.14	9.49
	3rd quartile			3.51	-3.76	2.26	3.25	4.45	2.44	1.27	8.26
	95th percentile			0.35	-4.44	-0.19	1.18	2.21	2.11	-1.31	5.26
	S&P/TSX Small Cap			6.58	-1.66	2.96	5.39	4.57	6.28	0.09	6.45
	BMO Small Cap weighted			5.86	-2.34	2.81	5.07	6.72	6.32	0.64	6.91
U.S. equity
				3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile			8.59	17.23	24.26	27.95	27.75	17.09	20.05	21.61
	1st quartile			6.18	9.46	17.34	19.67	19.21	14.02	17.10	18.63
	Median			5.27	7.48	15.02	14.93	16.43	12.91	15.64	17.80
	3rd quartile			4.66	6.20	13.44	13.64	14.37	10.98	14.58	16.63
	95th percentile			3.14	4.57	11.03	10.46	12.28	9.78	13.18	15.66
	S&P 500 (C$)			5.63	7.74	15.50	16.05	17.24	13.92	16.77	18.63

Rates of return for periods ending June 30, 2018 (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				3.44	5.09	10.56	14.33	18.71	11.32	13.23	15.90
	1st quartile				1.32	3.13	9.32	11.28	16.15	9.34	11.26	13.45
	Median				0.16	1.59	6.94	9.37	14.72	7.67	8.97	12.00
	3rd quartile				-0.46	0.76	4.70	6.44	13.07	6.28	7.98	11.03
	95th percentile				-1.85	-1.05	2.66	3.52	10.57	4.72	6.87	9.52
	MSCI EAFE (C$)				0.77	2.10	6.62	8.22	14.08	6.74	8.10	11.24
Global equity (U.S.A., Europe and Asia)
					3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile				5.72	9.85	19.02	22.75	22.57	15.81	17.62	18.02
	1st quartile				3.96	6.43	13.50	14.55	18.51	11.78	14.07	15.97
	Median				2.95	4.46	10.69	12.06	15.04	10.51	12.89	14.90
	3rd quartile				1.71	2.50	8.85	8.56	12.87	9.38	11.78	13.47
	95th percentile				-1.05	-0.93	4.41	5.69	8.56	6.96	8.59	12.04
	MSCI World (C$)				3.80	5.44	11.45	12.52	15.32	10.38	12.45	14.90
Emerging markets
					3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile				-4.05	0.86	8.86	14.36	21.88	13.09	13.46	14.06
	1st quartile				-4.58	-0.27	7.43	12.34	20.26	11.02	11.16	12.67
	Median				-5.10	-1.86	5.99	9.05	17.81	9.64	9.98	10.83
	3rd quartile				-6.49	-4.03	3.73	6.55	12.04	7.25	7.94	8.75
	95th percentile				-8.84	-5.93	-2.84	-1.08	5.53	6.02	6.07	7.43
	MSCI Emerging markets				-5.98	-1.84	5.72	9.99	16.87	7.85	8.78	10.14

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.

Heather MacDonald, Manager, Corporate Communications, 416.390.2625, [email protected]; Jean Bergeron, FSA, FCIA, CFA, Partner, 514.392.7852, [email protected]

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