Northern Trust Universe Tallies the Impact of 2008 Market Collapse on U.S. Institutional Plan Sponsors
Performance Measurement Database Shows Median 12-month Losses are more than 25% for Public Funds, Corporate Pensions and Foundations & Endowments
CHICAGO, January 23, 2009 —
Northern Trust announced today that most U.S. institutional investment plan sponsors endured a dismal year in 2008, with the median plan losing a quarter of its value in the 12-month period ending December 31, 2008, 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 $600 billion, which subscribe to Northern Trust performance measurement services.The median plan in the performance measurement database posted a 25% loss for 2008, including a 13.1% loss in the fourth quarter. Foundations & Endowments performed marginally better than the Public Funds or Corporate ERISA pension segments for the year, but lagged in the final quarter, according to median return data:
Segment Q4 2008
Foundation/Endowment (-13.7)% (-25.4)%
Public Funds (-13.6)% (-26.6)%
Corporate ERISA (-12.9)% (-26.6)%
"These results confirm that institutional investors were not spared from the impact of the global financial crisis in 2008, despite their efforts to diversify beta sources in recent years," said Paul d'Ouville, global director of Investment Risk & Analytical Services at Northern Trust. "While U.S. equities were the primary source of negative results, the markets provided few safe havens, and last year's extraordinary environment could prompt a reassessment of risk models and investment strategies by large institutional investors."
Northern Trust performance data show that investment managers hired by plan sponsors were in line with their benchmarks, and that allocations to private equity and fixed income contributed to plan returns. Foundations & Endowments, for example, derived a relative advantage through larger allocations to private equity, which returned (-5.7)% in 2008, compared to the U.S. equity program return of (-37.5)% and the international equity program return of (-43.2)% for the year. The median F&E plan had an 11% allocation to private equity, while the median Corporate ERISA plan allocated less than 1% to the asset class.
The losses in 2008 also drove down longer-term performance numbers for the institutional plans. While five-year median returns remain positive, three-year returns dipped into negative territory as of December 31, 2008:
3-Year 5-Year
Corporate ERISA (-3.3)% 1.9%
Public Funds (-2.8)% 1.8%
Foundations & Endowments (-2.6)% 2.0%
"These results provide an important data point, quantifying the results in 2008 and over longer periods so that institutional investors can check their performance against their larger peer groups," said William Frieske, performance consultant, Northern Trust Investment Risk & Analytical Services.
As a part of its client focus philosophy, Northern Trust has provided risk and performance services for over three decades. Northern Trust's Investment Risk & Analytical Services capabilities include risk monitoring and measurement, performance evaluation and other specialty services, with continuing investment in research and client-focused product development.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, fiduciary and banking solutions for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has a growing network of 85 offices in 18 U.S. states and has international offices in 15 locations in North America, Europe, the Middle East and the Asia-Pacific region. As of December 31, 2008, Northern Trust had assets under custody of US$3.0 trillion, and assets under investment management of US$575.5 billion. Northern Trust, founded in 1889, has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit http://www.northerntrust.com.