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

Pension funds benefit from first-quarter interest rate increase

TORONTO--(BUSINESS WIRE)--Morneau Shepell (TSX: MSI) has released the results of its Performance Universe of Pension Managers’ Pooled Funds for the first quarter of 2021.

According to the report, in the first quarter of 2021, diversified pooled fund managers posted a median return of 1.8 per cent before management fees.

“The stock market continued to rise in the first quarter and the MSCI World Index delivered a 3.5 per cent return. The Canadian Equity S&P/TSX Composite Index posted a return of 8.1 per cent in the first quarter and the U.S. stock S&P 500 Index registered a return of 6.2 per cent (in U.S. dollars) and 4.9 per cent in Canadian dollars. The Emerging Markets Index posted a return of 1.0 per cent (in Canadian dollars). During the first quarter of 2021, bond interest rates rose significantly and returns were negative. For the Canadian bond market as a whole, the return was negative 5.0 per cent,” said Jean Bergeron, Partner for the Morneau Shepell Asset & Risk Management consulting team.

“The increase in interest rates reduced the actuarial liability of pension funds in the first quarter, thereby improving their financial position. We estimate that the solvency ratio of an average pension fund has increased by around 4.2 per cent to 7.0 per cent in 2021,” added Bergeron.

During the first quarter of 2021, diversified pooled fund managers obtained a median return of 1.8 per cent, which was 2.1 per cent higher than 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 first quarter of 2021, managers obtained a median return of negative 4.9 per cent on bonds (Universe mandate); the return was 0.1 per cent higher than the benchmark index.

During the first quarter of 2021, short-term, mid-term and long-term bond indices posted returns of negative 0.6 per cent, negative 4.5 per cent and negative 10.7 per cent, respectively. The high-yield bond index posted a return of 2.2 per cent, while the real return bond index provided a negative 7.3 per cent return.

Canadian equities
In the first quarter of 2021, the median return for Canadian equity managers was 8.4 per cent, which was 0.3 per cent higher than the 8.1 per cent posted by the S&P/TSX Index.

During the first quarter of 2021, the S&P/TSX Small Cap Index gained 9.7 per cent, whereas the S&P/TSX Completion Index representing mid-cap stocks registered an increase of 5.4 per cent, and the large-cap S&P/TSX 60 Index grew by 8.8 per cent.

Foreign equities
Foreign equity managers’ median returns and appropriate benchmark indices’ returns for the first quarter of 2021 are as follows:

• 3.5 per cent for U.S. equities versus 4.9 per cent for the S&P 500 Index (C$);
• 1.6 per cent for international equities versus 2.1 per cent for the MSCI EAFE Index (C$);
• 3.5 per cent for global equities versus 3.5 per cent for the MSCI World Index (C$);
• 1.6 per cent for emerging market equities versus 1.0 per cent for the MSCI Emerging Markets Index (C$).

Alternative investments
The Dow Jones Credit Suisse Hedge Fund Index (formerly CSFB/Tremont Hedge Fund Index) posted a return of 1.6 per cent (C$) for the first quarter of 2021.

The Performance Universe covers about 285 funds managed by nearly 46 investment management firms.

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 Asset & Risk Management consulting team at Morneau Shepell produces the quarterly Performance Universe results. 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 a leading provider of technology-enabled HR services that deliver an integrated approach to employee well-being through our cloud-based platform. Our focus is providing world-class solutions to our clients to support the mental, physical, social and financial wellbeing of their people. By improving lives, we improve business. Our approach spans services in employee and family assistance, health and wellness, recognition, pension and benefits administration, retirement consulting, actuarial and investment services. Morneau Shepell employs approximately 6,000 employees who work with some 24,000 client organizations that use our services in more than 160 countries. Morneau Shepell is a publicly traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.

ID-CORP, ID-RS

Summary
Rates of return for periods ending March 31, 2021 (annualized returns beyond one year)
Diversified
		3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile	6.09	12.73	20.88	33.98	12.04	9.78	8.83	9.66
	1st quartile	2.71	9.57	15.51	28.23	10.38	8.58	7.94	9.09
	Median	1.76	7.66	11.65	24.20	8.57	7.90	7.13	7.99
	3rd quartile	0.91	6.10	10.57	22.48	7.73	7.30	6.02	7.40
	95th percentile	-0.93	1.62	8.35	18.19	6.77	5.61	5.06	6.15
	Benchmark*	-0.30	5.05	8.19	21.39	8.53	8.00	7.22	7.93
	Benchmark**	0.38	6.18	9.64	23.40	9.01	8.33	7.51	8.33
	* 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	0.16	0.47	1.29	4.01	3.47	3.45	2.66	2.51
	1st quartile	0.09	0.26	0.56	0.83	1.44	1.62	1.53	1.42
	Median	0.08	0.19	0.32	0.56	1.26	1.48	1.40	1.30
	3rd quartile	0.05	0.15	0.27	0.51	1.21	1.42	1.34	1.25
	95th percentile	-0.33	0.11	0.19	0.36	0.99	1.30	1.26	1.19
Canadian bonds
		3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile	0.29	4.36	7.82	15.68	5.72	5.93	5.15	5.67
	1st quartile	-4.10	-2.46	-0.57	6.23	4.67	4.96	4.32	4.24
	Median	-4.83	-3.66	-2.74	4.08	3.88	4.43	3.79	3.54
	3rd quartile	-5.23	-4.48	-3.96	2.62	3.48	4.11	3.54	3.15
	95th percentile	-10.61	-9.45	-9.67	-0.65	2.32	3.38	2.96	2.80
Canadian bonds (Universe mandate)
		3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile	-4.15	-2.30	-0.21	6.49	4.71	5.04	4.20	4.34
	1st quartile	-4.46	-3.52	-2.41	4.43	4.07	4.45	3.80	3.55
	Median	-4.87	-3.93	-3.01	3.20	3.71	4.28	3.59	3.32
	3rd quartile	-5.06	-4.30	-3.60	2.29	3.57	4.13	3.44	3.11
	95th percentile	-5.65	-5.15	-4.75	0.06	2.83	3.65	3.08	2.86

Rates of return for periods ending March 31, 2021 (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	12.36	28.16	35.85	53.52	15.68	12.98	10.49	11.36
	1st quartile	9.65	20.68	28.51	48.40	12.78	10.72	8.98	10.38
	Median	8.38	16.49	23.40	42.99	11.16	9.70	7.82	9.60
	3rd quartile	7.21	14.23	21.26	34.01	8.80	8.17	7.08	8.63
	95th percentile	4.41	10.37	16.65	25.99	5.82	5.00	4.22	6.13
	S&P/TSX	8.05	17.75	23.32	44.25	11.24	10.19	8.01	10.05
	S&P/TSX Capped	8.05	17.75	23.32	44.25	11.24	10.19	8.01	10.05
	* 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	12.37	29.13	44.84	101.80	24.31	15.61	12.77	13.85
	1st quartile	10.12	26.80	40.02	78.15	23.14	14.11	11.21	13.32
	Median	6.37	20.66	36.50	74.40	21.61	12.94	10.74	11.17
	3rd quartile	5.29	20.01	30.72	72.07	19.00	12.09	7.89	9.06
	95th percentile	4.54	15.11	30.47	67.94	9.12	1.38	0.11	3.38
	S&P/TSX Small Cap	9.74	35.50	44.50	100.15	13.84	8.36	4.42	9.01
	BMO Small Cap weighted	11.68	34.76	46.60	100.41	17.01	10.56	6.46	10.77
U.S. equity
		3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile	8.84	23.45	28.22	54.59	22.54	20.42	20.24	20.01
	1st quartile	5.68	13.83	22.29	41.30	19.28	17.35	17.12	18.30
	Median	3.45	9.93	19.67	38.15	16.41	15.56	13.89	15.46
	3rd quartile	1.89	7.78	17.61	35.41	14.22	14.08	12.07	14.02
	95th percentile	-0.67	2.85	12.36	22.88	6.61	9.91	9.65	10.64
	S&P 500 (C$)	4.87	12.25	19.68	38.59	16.99	15.81	14.46	15.55

Rates of return for periods ending March 31, 2021 (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	6.86	24.52	33.73	49.02	17.96	12.96	14.03	13.44
	1st quartile	3.83	15.90	23.44	39.81	12.85	7.86	9.77	10.08
	Median	1.56	12.14	15.77	27.36	9.77	6.62	7.58	8.84
	3rd quartile	-0.48	7.71	12.68	24.11	6.02	3.86	5.78	8.09
	95th percentile	-1.93	4.06	8.58	19.70	1.93	0.05	2.41	4.88
	MSCI EAFE (C$)	2.09	12.99	16.13	27.66	7.91	5.13	6.56	8.23
Global equity (U.S.A., Europe and Asia)
		3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile	10.64	29.28	35.33	63.08	24.34	19.90	19.69	18.83
	1st quartile	5.30	18.15	24.57	46.02	17.08	14.17	14.29	14.53
	Median	3.50	13.05	20.16	39.57	13.32	10.52	10.47	12.22
	3rd quartile	1.73	10.70	17.05	31.31	9.02	7.27	7.94	9.90
	95th percentile	-0.09	3.85	10.71	21.37	4.46	5.32	5.35	7.57
	MSCI World (C$)	3.51	12.51	19.09	36.01	13.95	11.86	11.34	12.71
Emerging markets
		3 months	6 months	9 months	1 year	2 years	3 years	4 years	5 years
	5th percentile	4.51	18.94	29.85	51.00	16.99	10.36	13.51	16.46
	1st quartile	3.24	18.09	29.00	48.10	15.34	8.37	12.26	14.76
	Median	1.63	16.68	25.96	45.05	12.83	7.36	11.24	12.74
	3rd quartile	-0.17	15.30	24.22	42.16	7.35	3.62	7.05	9.50
	95th percentile	-2.41	9.90	15.45	28.76	1.90	0.35	2.06	4.79
	MSCI Emerging markets	0.97	15.34	24.09	40.33	11.15	5.97	9.58	11.83

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.