U.S. institutional investment plan sponsors recorded a sixth straight quarter of losses in the period ending 31 March 2009 – but ended the quarter on a positive note, according to data in the Northern Trust Universe.
The Northern Trust Universe represents more than 300 institutional investment plans, with a combined asset value of approximately $530 billion, which subscribe to Northern Trust performance measurement services.
Corporate plans posted a median return of -6.6% in the first quarter, while Public Funds were slightly better at -6.3%, and Foundation & Endowment plans were strongest with median returns of -5.5%. Over the last 12 months, performance continues to be weak. The one-year return for Corporate plans was -27.1% while Public Funds were down 26.9% and Foundations & Endowments were down 25.9%.
In the Northern Trust Universe, the Total Equity Program was down by 10% in the first quarter, compared to a loss of 22.2% in the last quarter of 2008. Overall hedge fund returns were about 1% for the quarter, compared to -11% for the S&P 500 Index, and -13.9% for the MSCI EAFE Index of large cap international stocks.
“Even though the first quarter returns were among the lowest on record, the strong market rise in March helped all three types of plans – Corporate Pension, Public Fund and Foundation & Endowment – improve their results compared to recent quarters,” says William Frieske, performance consultant, Investment Risk & Analytical Services, Northern Trust. “The Standard & Poor’s 500 Index, a gauge of U.S. stocks, gained 8.8 percent in March, for its strongest month since October 2002.”
“Over the quarter and longer-term, Foundation & Endowment funds got a further boost from their relatively large allocation to hedge funds. The composite F&E allocation to hedge funds was about 8% in our Universe. That compared to a hedge fund allocation of about 2% for both Corporate plans and Public Funds.”
“On the positive side, active management proved to be successful for institutional investors in the first quarter,” continues Frieske. “The median Corporate ERISA plan outperformed its benchmark by 252 basis points in the first quarter of 2009, compared to 169 basis points of under-performance in the fourth quarter of 2008.”
Most of the excess performance can be attributed to U.S. equity managers. The median Domestic Equity Program was about 120 basis points better than the Russell 3000 Index.
L.D.