Pension fund returns see improvement in second quarter

By The IJ Staff | July 24 2020 03:00PM

Photo: Freepik

Pension fund managers saw a sharp reversal in the second quarter, posting a strong increase in returns compared to the first quarter of the year, says Morneau Shepell’s Performance Universe of Pension Managers' Pooled Funds report for Q2 2020.

The report, released July 23, says that in in the second quarter of 2020 diversified pooled fund managers posted a median return of 11.0 per cent before management fees and negative 0.8 per cent since the beginning of the year.

"The dramatic fall in equity and credit prices in the first quarter of 2020 was sharply reversed this following quarter as the easing of COVID-19 lockdowns and early signs of an economic recovery supported both markets,” said Jean Bergeron, Partner for the Morneau Shepell Asset & Risk Management consulting team. “The speed and magnitude of both the first-quarter sell-off and the subsequent rebound have been unprecedented.”

Morneau Shepell notes that the MSCI World Index delivered a 14.2 per cent return for the second quarter. During the second quarter, the bond market posted a positive return of 5.9 per cent, the Canadian Equity S&P/TSX Composite Index posted a return of 17.0 per cent and the U.S. Stock S&P 500 Index registered a return of 20.5 per cent (in U.S. dollars) and a 15.8 per cent return in Canadian dollars while the Emerging Markets Index posted a return of 13.1 per cent (in Canadian dollars).

Higher solvency liability

"The second-quarter reversal has improved pension fund financial positions given the positive returns. However, the higher solvency liability caused by the decrease in interest rates means that pension fund financial positions fell by an average of 3.0 per cent to 10.0 per cent compared to the beginning of the year," added Bergeron.

The Performance Universe covers about 303 funds managed by nearly 45 investment management firms.

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