Pensions post median return of zero

By Andrew Rickard | April 29 2016 01:36PM

Canadian pension plans earned a median return of 0% during the first quarter, and this was before management fees were deducted.

Morneau Shepell has released its survey of pension plan results for the first quarter of 2016. The poll covered 342 pooled funds managed by nearly 50 investment management firms and found that, on average, diversified pooled fund managers underperformed the benchmark; their median return was 0% while a benchmark portfolio consisting of 55% equities and 45% fixed income returned 0.3% during the period.

Losses in foreign equities

Jean Bergeron, the partner responsible for Morneau Shepell's asset and risk management consulting team, says losses in foreign equities outweighed domestic gains and notes that these poor foreign returns were exacerbated by the rise in the Canadian dollar. Bergeron also points out that many pension funds have reduced the amount of Canadian stocks they hold in their portfolios in favour of foreign securities and investments in real estate and infrastructure.

"On a solvency basis, pension fund financial positions declined by about 5% in the first quarter, due to weak returns and the increase in the solvency liability," said Bergeron.