Institutional plan sponsors netted investment gains of 4.2 per cent at the median in the first quarter of 2017, according to the latest Northern Trust Universe data.
It was the sixth consecutive three-month period of gains for institutional asset owners, with equities providing the bulk of positive performance in the quarter.
The Northern Trust Universe tracks the performance of approximately 300 large US institutional investment plans, with a combined asset value of approximately USD897 billion, which subscribe to performance measurement services as part of Northern Trust's asset servicing offerings.
“Institutional asset owners continue to experience quarterly returns that are above long-term averages, supported by rising equity prices,” says Amy Garrigues, head of investment risk and analytical services at Northern Trust. “The 4.2 per cent median return for this year’s first quarter compares to the average median quarterly return of about 2.8 per cent since the end of the financial crisis in second quarter of 2009. Over 20 years, from 1996 through 2016, the average median quarterly return for asset owners was 1.8 per cent.”
Since the end of the financial crisis in March 2009, the median total equity programme in the Northern Trust Universe has had an average annual return of 14.3 percent. In the first quarter, the median total equity program was up 6.7 percent, while the median international equity program gained more than 8 per cent. Fixed income, private equity and real estate programmes had gains of less than 2 per cent each in the first quarter.
The public fund segment had the best median return in the first quarter of 2017, on a relative basis, gaining 4.3 percent. Close behind was the foundations & endowments segment, up 4.2 per cent, while corporate ERISA plans were up 4.1 per cent.
Public funds benefited from a relatively large allocation to equities, compared to the other plan types. Public funds had a median allocation of almost 56 per cent to equities as a whole while corporate ERISA plans had an allocation of 45 per cent and foundations & endowments had a median allocation closer to 44 per cent.
For foundations & endowments, the driver of the positive quarter was a relatively small allocation to fixed income, which had the weakest returns of any asset class in the quarter. Allocations to fixed income were about 13.5 per cent for F&E funds at the median, compared to 22 per cent for public funds and 44.5 per cent for corporate ERISA plans. While corporate ERISA plans had the largest allocation to fixed income, they also had the largest allocation to high yield, emerging market debt and longer duration investment grade bonds, all of which returned noticeably more than traditional core bonds.
