U.S. Institutional Plan Sponsors Gain In Third Quarter, According To Northern Trust Universe Data

Institutional plan sponsors in the Northern Trust Universe gained about 4.5 percent at the median in the third quarter, as U.S. and international equities bounced back from a negative performance in the prior quarter and fixed income assets continued to generate modest positive returns.

The Northern Trust Universe tracks the performance of about 300 large U.S. institutional investment plans, with a combined asset value of approximately $748 billion, that subscribe to Northern Trust performance measurement services.

“A strong rebound in the equity markets boosted results for institutional investors in the third quarter, and over longer time periods,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services. “While the financial markets have had some negative quarters in recent years, the median plan sponsor in our Universe now has a three-year return of nearly 9 percent. The mix of asset classes in these institutional plans, including private equity and fixed income, has helped to moderate the effects of market volatility and produce steady gains over time.”

In the third quarter, Corporate Pension Plans, for private-sector employees, were the best-performing segment, gaining approximately 5 percent at the median for the three months ending September 30, 2012. Public Funds – pension plans for public employees – gained 4.7 percent and the Foundations & Endowments segment – funds managed for philanthropic organizations, colleges and universities – rose 4.3 percent in the quarter, according to Northern Trust Universe data.

Positive returns in the third quarter were driven by U.S. equities, which make up 30 percent or more of all assets in most institutional portfolios in the Northern Trust Universe. The median U.S. Equity program in the Universe gained almost 6.5 percent in the third quarter, after dropping 5 percent in the previous quarter. Other asset classes also performed well: the median International Equity program returned 7.2 percent in the quarter, and the median Fixed Income program gained 2.9 percent. International bonds, especially those from Emerging Markets, outperformed other fixed income segments but are a relatively small allocation in most plans.

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