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Institutional asset owners expand on previous quarterly gain, says Northern Trust

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The second quarter of 2016 marked the third consecutive quarter of positive returns for institutional asset owners after two consecutive quarters of declines starting in the second quarter of 2015, with plan sponsors gaining approximately 1.9 per cent at the median.

That’s according to new data released by Northern Trust which reveals that the 1.9 per cent median return was a significant increase from the 0.7 per cent median return recorded in the previous quarter.
 
The Northern Trust Universe tracks the performance of approximately 300 large US institutional investment plans, with a combined asset value of approximately USD899 billion, which subscribe to performance measurement services as part of Northern Trust’s asset servicing offerings.
 
Since 1998, the average second quarter median return has been 1.7 per cent, placing this quarter slightly above average. In the second quarter of 2016, corporate ERISA plans fared best among all plan types with a median return of 3 per cent. Public funds gained 1.7 per cent while foundations and endowments netted 1.5 per cent in the second quarter.
 
“Differing returns across plan types were driven largely by the duration of their fixed income investments,” says Bill Frieske (pictured), senior investment performance consultant, Northern Trust’s Investment Risk & Analytical Services. “In an effort to de-risk their defined benefit pension plans, corporate ERISA plan sponsors have been lengthening the duration of their fixed income programmes. Interest rates declined in the second quarter, which increased returns for long duration bonds and helped boost corporate ERISA plan returns.”

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