Diversified pooled fund managers outperformed the benchmark, on average, in the first quarter of the year.
According to Morneau Shepell’s Performance Universe of Pension Managers’ Pooled Funds report, these managers’ median return (4.6%) was 0.3 percentage points above that of the benchmark portfolio (with allocation of 55% in equity and 45% in fixed income) used by many pension funds.
The stock market continued to perform well in the first quarter, and the bond market achieved good returns due to a decrease in interest rates. Moreover, the Canadian dollar’s weakness against other major currencies had a positive impact on foreign investments, converted into Canadian dollars.
This has resulted in excellent returns for pension plans since the beginning of the year.
“Given the decrease in interest rates used to discount pension benefits, the solvency liability of an average pension fund was up about 3.9% in the first quarter,” said Jean Bergeron, partner and leader of Morneau Shepell’s asset and risk management consulting team.
“Pension fund financial positions have thus slightly improved since the beginning of the year. On a solvency basis, it is estimated that for an average pension fund the solvency ratio improved by about five points in the first quarter.”