Canadian diversified pooled fund managers posted a median return of 2.6% during the fourth quarter of 2019 before management fees, bringing its full-year return to a robust 15.8%, according to consulting firm Morneau Shepell.
The quarterly performance outperformed the benchmark portfolio by 0.5%; however, the annual return underperformed the benchmark portfolio by 0.2%.
“Both stock and bond markets posted very positive returns in 2019,” Jean Bergeron, vice president of the Morneau Shepell Asset & Risk Management consulting team, said in a statement. “This excellent performance was offset by the stronger Canadian dollar, which scaled down the return in Canadian dollars to 25.2%.”
Fund managers reported median returns of 3.0% for Canadian equities during the fourth quarter, compared with the 3.2% posted by the S&P/TSX Index. For 2019, Canadian equities had a median return of 21.7%, compared with the S&P/TSX Index’ return of 22.9% for the year.
The S&P/TSX Small Cap Index gained 15.8% during the year, while the S&P/TSX Completion Index, which represents mid-cap stocks, increased 26.1%. The large-cap S&P/TSX 60 Index rose 21.9%.
For the year, foreign equity managers reported median returns of 23.7% for US equities, compared with the S&P 500 Index’s 25.2% return. They saw 18.0% returns for international equities versus 15.9% for the MSCI EAFE Index. Earnings were 20.1% from global equities, compared with the MSCI World Index’s 21.2% return, and 15.2% for emerging markets equities versus 12.9% for the MSCI Emerging Markets Index.
Fund managers reported a median return of 7.1% on bonds for the year, and a median loss of 0.7% during the fourth quarter, which was 0.2% ahead of the benchmark’s performance in both cases.
During 2019, short-term, mid-term and long-term bond indices posted returns of 3.1%, 5.8% and 12.7% respectively; the high-yield bond index returned 8.5%, while the real return bond index increased 8.0%.
“With respect to pension fund actuarial liability, the decrease in interest rates meant that solvency liability also rose significantly during the year,” said Bergeron. “Although pension fund returns were very positive for 2019, on a solvency basis pension fund financial positions improved by an average of only about 1.0% from the beginning of the year.”
The results are based on the returns of approximately 322 Canadian pooled funds managed by nearly 51 investment management firms that have a combined market value of more than C$548 billion ($416.7 billion).