Modest First Quarter Gains For Institutional Plan Sponsors

Positive gains across all asset classes helped institutional plan sponsors gain a median return of approximately 2 percent in the first quarter of 2014, according to Northern Trust Universe data.

The Northern Trust Universe tracks the performance of about 300 large U.S. institutional investment plans, with a combined asset value of approximately $899 billion, which subscribe to Northern Trust performance measurement services.

Institutional plans benefited from continued gains in domestic equity and fixed income, in addition to modest gains in the international equity and fixed income markets. Median returns in the first quarter were led by the corporate ERISA plans with a return of 2.8 percent. Public Funds followed next, netting a gain of 1.9 percent. Rounding out the top 3, Foundations & Endowments posted a return of 1.6 percent. Corporate ERISA plans recorded their third consecutive quarterly gain, while Public Funds and Foundations & Endowments generated positive returns for the seventh straight quarter.

“Compared to the fourth quarter of 2013, plan sponsors continued to see positive gains but at a slower rate. All asset classes saw positive returns, with private equity, real estate, and domestic fixed income performing the best,” said Bill Frieske, senior performance consultant, Northern Trust Investment Risk and Analytical Services. “Modest but sustained growth, especially in the equity and fixed income sectors globally, helped propel institutional plan sponsors to another positive quarter.”

Asset allocation per segment was as follows:
  • Public Funds were weighted towards U.S. equity (32.7 percent) and international equity (22.9 percent)
  • Foundations & Endowments were weighted towards private equity (23.3 percent) and U.S. equity (20.2 percent)
  • Corporate ERISA plans were weighted towards U.S. fixed income (36.8 percent) and U.S. equity (29.3 percent)

The U.S. fixed income and real estate sectors provided plan sponsors with modest gains in the first quarter. Overall, the best performing investment program in the Northern Trust Universe was the private equity program, which returned 4.2 percent in the quarter at the median. The median real estate investment program returned 2.8 percent, while the U.S. fixed income program returned 2.2 percent. Domestic equity, the largest asset class in most plans, returned 1.6 percent and international equity returned 0.6 percent.

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