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Pensions

Value of company pension plans dropped by about 11% last year, says Morneau Shepell

Better results possible with Risk Management Portfolio

TORONTO - Morneau Shepell Ltd. says the typical pension plan dropped in value by about 11% last year, but that a more strategic approach could have prevented this negative impact.

"As of December 31, 2011, a typical pension plan with a traditional portfolio saw its financial position deteriorate by about 11%, but our Risk Management Portfolio kept pace with liabilities," says Patrick De Roy, Partner and National Leader of the Risk Management Practice for Morneau Shepell. "It actually shows growth of 12% last year."

Morneau Shepell's Risk Management Portfolio is designed to reduce fluctuations in a plan's financial position. While a traditional pension plan portfolio heavily invests in equities, the Risk Management Portfolio is based on an investment policy with a more diversified asset mix and a similar, expected long-term return. The objective is to reduce risk by better matching liabilities, and by investing in alternative strategies that are less correlated with equity markets.

"In 2011, corporate bond yields decreased, resulting in greater liabilities," says Jean Bergeron, Partner and Practice Leader for Morneau Shepell's Investment Consulting Practice. "A traditional pension plan portfolio, which has a large mismatch between plan assets and liabilities, did not grow enough to compensate for this increase."