Positive Returns Continue in Third Quarter for U.S. Institutional Plan Sponsors

Investment returns stayed in positive territory for institutional plan sponsors in the third quarter of 2019. The median plan in the Northern Trust Universe finished with a 0.8 percent return for the three months ending September 30, 2019. 

The Northern Trust Universe tracks the performance of approximately 300 large U.S. institutional investment plans, with a combined asset value of approximately $1.08 trillion, which subscribe to performance measurement services as part of Northern Trust’s asset servicing offerings.

“Asset class diversification helped institutional investors to generate positive returns in the third quarter, with fixed income playing a key role,” said Mark Bovier, regional head of Investment Risk and Analytical Services at Northern Trust. “U.S. equity programs, the largest allocation in most plans in the Northern Trust Universe, had a median return of 0.7 percent in the quarter, while the median return for international equity programs was -1.5 percent. Meanwhile the U.S. fixed income program universe median return was up 2.1 percent for the quarter. The 10-year Treasury Note yield dropped from 2.0 percent to 1.7 percent during the quarter, putting upward pressure on bond prices.”

Of the three institutional segments tracked by Northern Trust, Corporate ERISA pension plans reported a median return of 2.3 percent, while Public Funds had a median return of 0.7 percent and Foundations and Endowments produced a 0.4 percent median return in the third quarter.

ERISA plans benefited from a median exposure to U.S. fixed income of 38.0 percent, the largest allocation to bonds of any segment. The median U.S. equity allocation for ERISA plans in the third quarter was 26.5 percent, down from 27.5 percent the previous quarter, and international equity median exposure was 8.8 percent.

Public Fund plan median US equity allocation for the current quarter was 33.7 percent. International equity median exposure was 15.7 percent while the median exposure to U.S. fixed income came in at 24.2 percent. 

Foundation and Endowment plans had a median U.S. equity allocation of 27.6 percent in the third quarter. International equity median exposure was 10.1 percent while the median exposure to U.S. fixed income was 11.1 percent. Alternative assets are widely used in the F&E universe, with private equity and hedge fund median allocations at 12.6 and 11.1 percent, respectively, as of September 30, 2019.

Results of US plan level universes as of September 30, 2019:

                                                3rd Qtr              1 Yr                  3 Yr                  5 Yr 

ERISA                                      2.3%                 8.8%                 8.1%                 7.0%

Public Funds                             0.4%                 3.5%                 7.7%                 6.1%

Foundations & Endowments       0.7%                 4.0%                 8.1%                 6.6%