Canadian Diversified Pool Funds Return 2.2% in Q2

Returns are up more than 11% so far in 2019.

Canadian diversified pooled fund managers reported median returns of 2.2% before management fees during the second quarter of 2019, and returns of 11.1% so far this year, according to Morneau Shepell’s Performance Universe of Canadian Pension Managers’ Pooled Funds.

The 2.2% return for the quarter was 0.5% below the benchmark portfolio, which has an asset allocation of 55% in equity and 45% in fixed income.

“In general, markets posted positive returns in the second quarter, continuing the rebound started early in the year,” Jean Bergeron, head of Morneau Shepell’s asset and risk management consulting team, said in a statement.  “Pension fund solvency liability was up during the quarter due to a decrease in interest rates. However, given the high returns for the period, pension fund financial positions on a solvency basis improved.”

Bergeron added that the solvency ratio for a pension plan with an average maturity has improved by approximately -0.6% to 1.2% since the beginning of the year. 

The median return for Canadian equity managers during the quarter was 2.7%, which was 0.1% higher than the 2.6% posted by the S&P/TSX Index benchmark. At the same time, the S&P/TSX Small Cap Index decreased 0.3%, the S&P/TSX Completion Index representing mid-cap stocks rose 1.2%, and the large-cap S&P/TSX 60 Index grew 3.0%.

US equities rose 2.3% during the second quarter, compared with a 2.1% rise by the S&P 500 Index. International equities gained 1.1%, compared with 1.4% for the MSCI EAFE Index. Global equities increased 1.7%, matching the return for the MSCI World Index, while emerging markets equities were down 0.6%, compared with the 1.5% quarterly loss for the MSCI Emerging Markets Index.

Morneau Shepell said the median return for bonds in the second quarter was 2.6%, which was 0.1% higher than the benchmark index, while short-, mid-, and long-term bond indices had returns of 0.9%, 2.1%, and 4.8%, respectively. The high-yield bond index posted a 0.9% return, while the real return bond index provided a 3.5% return.

According to Morneau Shepell, the funds included in the Universe of Canadian Pension Managers’ Pooled Funds have a market value of more than C$525 billion ($399 billion). The results the study are based on the returns provided by portfolio managers from independent investment management firms, insurance companies, trust companies, and financial institutions, and the returns are calculated before management fees are deducted.


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