Canadian pension fund managers’ pooled funds delivered solid returns in 2017, according a report from consulting firm Morneau Shepell.
In 2017, managers recorded a median return of 8.6% before management fees, and 3.9% in the fourth quarter.
“Stimulated by strong and synchronized global economic growth, stock markets rose to record levels in 2017. The Canadian stock market did not do as well as in 2016, but still grew 9.1%. U.S. equities continued to perform well and the S&P 500 Index posted a 13.8% return in Canadian dollars,” says Jean Bergeron, partner responsible for the Morneau Shepell asset and risk management consulting team.
On average, during the fourth quarter, managers underperformed the benchmark In effect, the median return (3.9%) for these managers was 0.5% lower than the 4.4% return of the benchmark portfolio (with an allocation of 55% in equity and 45% in fixed income) used by many pension funds. Since the beginning of the year, the median pension fund return was 8.6%, which is 0.3% lower than the benchmark portfolio.
“Emerging market equities outperformed all others equity markets, with the MSCI emerging markets index returning 28.7% in Canadian dollars. Bond returns were modest in 2017, at about 3% for the market as a whole,” adds Bergeron.
Additionally, the strong returns boosted pension fund solvency improved in 2017.
“The solvency ratio for an average pension plan improved by 5% to 7% during the year,” says Bergeron.