Institutional investment plan sponsors in the U.S. had a positive first quarter, gaining 7% on average on the back of strong equity performance, according to the Northern Trust Universe. The data tracks clients who subscribe to the firms performance measurement services.
Public funds had a median return of 7.7% in the first quarter, while corporate ERISA pension plans and foundations & endowments each gained 6.9%.
The median U.S. equity program gained 12.9% compared to international equity programs, which were up 12%. Fixed income grew 1.6% in the first quarter.
As for alternatives, real estate was up 2.6%, private equity 2.2% and hedge funds 4.8% in the quarter.
“The main driver of first quarter performance was U.S. equities, a core holding in most institutional plans,” says William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services (IRAS). “After positive returns in ten of the last 12 quarters, the median plan has gained 15% in the past three years. Active investment management has also helped plans in the Northern Trust Universe to generate returns ahead of their assigned benchmarks, according to our data.”
Northern Trust Universe data also show that plan sponsors have made significant shifts in asset allocation over the past decade. Allocation to U.S. equities decreased from 50% of total assets in 2000 to 32% in mid-2011. In the same period, private equity allocations rose from 3.5% of total assets to 8%, while allocations to hedge funds went from near zero to more than 5% of all mandates.
“Alternative assets have become mainstream over the past decade, especially within the largest plans,” says Jeff Feeney, North America Region Head of IRAS. “Investing in alternative assets brings the promise of better than public market returns but also the reality of administrative demands brought on by the lack of transparency and liquidity inherent in these asset classes.”
(CG)