Institutional plan sponsors reaped a fourth consecutive year of positive investment returns in 2012, with equity markets contributing a large portion to the 12.3 percent gain for the median plan in the Northern Trust Universe. Corporate Pension Plans and Public Funds, with higher allocations to public equities, had stronger returns than the Foundations & Endowments segment in the 12 months ending December 31, 2012.
The Northern Trust Universe tracks the performance of about 300 large U.S. institutional investment plans, with a combined asset value of approximately $760 billion, which subscribe to Northern Trust performance measurement services.
“With the double-digit gains of 2012, the median plan in the Northern Trust Universe has not had a down year since the 25 percent drop in 2008,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services. “Rising, if volatile, stock markets have driven much of the positive performance since that historic financial collapse. As a result, the median sponsor now has a three-year return of just over 8.4 percent.”
Public equities were again key to performance in 2012, with programs in the Northern Trust Universe returning 16.9 percent at the median for the year. International equity programs gained 18.2 percent at the median, while the median U.S. equity program gained 16 percent. The median private equity program, meanwhile, had a 10 percent return for the year, and total fixed income programs gained 8.8 percent at the median.Corporate Pension Plans had the highest returns in the Northern Trust Universe, gaining 13.6 percent at the median in 2012. Public Funds – pension plans for public employees – gained 12.9 percent and the Foundations & Endowments segment – funds managed for philanthropic organizations, colleges and universities – rose 11.5 percent for the year. In the fourth quarter, Public Funds led with 2.1 percent, Corporate plans gained 1.86 percent and F&E plans returned 1.81 percent at the median, according to Northern Trust Universe data.