According to the report, in the second quarter of 2017, diversified pooled fund managers posted a median return of 0.7 per cent before management fees.

“In the second quarter, the Canadian stock market underperformed by 1.6 per cent, while global stock markets posted positive returns. The rise in the Canadian dollar versus several foreign currencies had a negative impact on Canadian investors. For the second quarter in a row, emerging market equities dominated with the MSCI Emerging Markets Index returning 6.7 per cent in local currency (3.6 per cent C$). The US equities in the S&P 500 Index rose 3.1 per cent in local currency (0.6 per cent C$) and the international equities in the MSCI EAFE Index returned 2.7 per cent in local currency (3.3 per cent C$). Following the decrease in bond yields for the first two months of the quarter, Canadian bonds ended the quarter with positive returns. The median bond manager achieved a return of 1.1 per cent for the quarter,” said Jean Bergeron, Partner responsible for Morneau Shepell’s Asset and Risk management Consulting team.

“On a solvency basis, pension fund financial positions declined in the second quarter, largely due to lower interest rates in the first two months. The solvency liability for an average pension plan rose 6.2 per cent, while the median return was only 0.7 per cent,” added Bergeron.

On average, during the second quarter of 2017, diversified pooled fund managers underperformed the benchmark. In fact, the median return (0.7 per cent) for these managers was 0.4 per cent lower than the benchmark portfolio (with an allocation of 55 per cent in equity and 45 per cent in fixed income) return (1.1 per cent) used by many pension funds. Since the beginning of the year, the median pension fund return was 3.6 per cent, 0.6 per cent lower than the benchmark portfolio.

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