Diversified pooled pension fund managers posted a median return of 0.7 per cent before management fees for the second quarter of 2017 and a median year-to-date return of 3.6 per cent, according to a new report by Morneau Shepell Ltd.
The quarterly report, which covers about 324 pooled funds that have a market value of more than $262 billion, also found the average pension plan’s solvency liability rose by 6.2 per cent in the second quarter of the year.
“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,” said Jean Bergeron, managing partner of Morneau Shepell’s asset management practice.
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He also noted that Canadian bond yields eventually rebounded with positive returns and the average bond manager achieved a return of 1.1 per cent for the quarter. During the same period, long-term bonds posted a return of 4.1 per cent, while medium-term and short-term bonds posted minus 0.1 per cent and minus 0.4 per cent, respectively.
With regards to Canadian equities, managers returned minus 1.4 per cent, which was higher than the 1.6 per cent decline experienced by the Canadian stock market.
“The rise in the Canadian dollar versus several foreign currencies had a negative impact on Canadian investors,” said Bergeron.
Read: Worries over bond yields cited as pension solvency declines in second quarter
The report found U.S. and emerging market equities fared better than domestic ones, producing returns of 0.6 per cent and 3.6 per cent, respectively, during the second quarter of the year. And fund managers returned 0.3 per cent for U.S. equities and four per cent for emerging markets.
In addition, hedge funds saw a poor performance in the second quarter of 2017, with the Dow Jones Credit Suisse hedge fund index posting a return of minus 1.8 per cent.
Read: Diversified pooled fund managers underperformed benchmark in Q1