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US institutional investment plan sponsors rebound in Q2

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US institutional investment plan sponsors experienced one of their best quarters in recent years during the period ending 30 June 2009, with a median return of 10.2 per cent, according

US institutional investment plan sponsors experienced one of their best quarters in recent years during the period ending 30 June 2009, with a median return of 10.2 per cent, according to data in the Northern Trust Universe.

The Northern Trust Universe represents the performance results of more than 300 large institutional investment plans, with a combined asset value of approximately USD540bn, which subscribe to Northern Trust performance measurement services.

"Institutional investors achieved a sharp and substantial recovery in the second quarter, driven by a reversal of fortune in the equity markets," says William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services.

Corporate Erisa plans led the way in the second quarter, posting a median return of 12 per cent, while public funds gained 11 per cent and foundations and endowments returned 9.3 per cent at the median. The quarterly results were the second-best in the past decade for corporate plans and third-best for public funds in that period, according to the Northern Trust Universe database.

"Corporate and public plans benefited the most from their exposure to equities, which outperformed other asset classes, while foundations and endowments were held back to some extent last quarter by their relatively large allocation to hedge funds," Frieske says. "The composite allocation to hedge funds in our F&E universe was about nine per cent as of 30 June, compared to about two per cent for both corporate plans and public funds. Overall, hedge fund returns, while solid at nine per cent for the second quarter, were substantially below the returns generated by equities."

In the Northern Trust Universe, the Total Equity Program gained 19.6 per cent at the median in the second quarter, compared to losses of ten per cent in the first quarter and 22.2 per cent in the fourth quarter of 2008. The S&P 500 Index of US stocks was up 15.9 per cent and non-US stocks gained 28 per cent, as measured by the MSCI ACWI ex-US Index.

The strong second quarter had a positive impact on long-term performance. Three-year median performance improved by approximately 350 basis points over the prior quarter’s results, while five-year medians improved by about 200 basis points.

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