In the fourth quarter of 2015, institutional asset owners gained approximately 2 percent at the median, according to Northern Trust Universe data. This marked a significant rebound from the median loss of 4.6 percent recorded in the third quarter.

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 performance measurement services as part of Northern Trust’s asset servicing offerings.

Public Funds had the best performance in the quarter with a return of 2.7 percent at the median, while Foundations & Endowments were in the middle returning 1.9 percent. Corporate ERISA plans came in third overall with a return of 1.8 percent at the median. All plan types recorded gains of at least 5 percentage points compared to the previous quarter.

Equities helped institutional plans recover from losses in the previous quarter, with the Russell 3000 up 6.3 percent and the MSCI EAFE index up 4.8 percent, said Bill Frieske, senior investment performance consultant, Northern Trust Investment Risk & Analytical Services.

“The driver for the relative strength of Public Funds was their larger allocation to equities,” Frieske said. “Public Funds had a 57 percent allocation to equities at the median compared to 45 percent for Corporate ERISA Plans and 42 percent for Foundations & Endowments.

Corporate ERISA plans would have generated a higher return if not for their larger exposure to long-duration bonds, with long-duration bonds losing almost 1 percent last quarter, he said. “Foundations & Endowments did not get any help from their larger allocation to private equity and hedge funds – the two asset classes were basically flat in the fourth quarter,” he said.

Domestically, the Russell 3000 out returned the median U.S. Equity program in the fourth quarter by 50 basis points. Looking at international equities, the median plan performed much better. The median international equity program performed 65 basis points better than the index.

Northern Trust’s findings generally showed:

  • Corporate ERISA plan returns were dampened by a large allocation to U.S. fixed income (38.1 percent at the median), in addition to private equity (7.4 percent at the median).
  • Public Fund returns were boosted by a large exposure to U.S. equity (33.8 percent at the median) and international equity (20.9 percent at the median).
  • Foundation & Endowment plan returns were negatively impacted by a large allocation towards private equity (23.9 percent at the median), but supported by exposure to domestic equity (19.4 percent at the median) and international equity (12.2 percent at the median)

Looking at asset allocation in the fourth quarter, corporate pension plans continue to move on a path of transferring assets from equity to fixed income investments. Public Funds continue to move money into private equity and international equity. The median allocation to private equity for Public Funds has gone from 1.6 percent last December to 5 percent currently. Foundations & Endowment plans reduced their allocation to fixed income from 16 percent to 11 percent, while continuing to allocate to hedge funds and private equity.

Longer-term returns as of December 31, 2015 are as follows:

    4th Qtr   1 Yr   3 Yr   5 Yr
ERISA   1.8%   -0.8%   6.8%   7.3%
Public Funds   2.7%   0.3%   7.6%   7.5%
Foundations & Endowments   1.9%   -0.3%   7.1%   6.4%

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has offices in the United States in 19 states and Washington, D.C., and 20 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of December 31, 2015, Northern Trust had assets under custody of US$6.1 trillion, and assets under management of US$875 billion. For more than 125 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit northerntrust.com or follow us on Twitter @NorthernTrust.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at http://www.northerntrust.com/disclosures.