Northern Trust announced today that U.S. institutional investment plan sponsors in the Northern Trust Universe lost 1.5 percent at the median in the second quarter, with negative returns from domestic and international equities dragging down performance. However, positive returns in most quarters since 2009 have boosted longer-term performance, and the median plan in the Northern Trust Universe has a three-year return of more than 11 percent.
The Northern Trust Universe represents the performance of about 300 large institutional investment plans, with a combined asset value of approximately $712 billion, which subscribe to Northern Trust performance measurement services.
In the second quarter, Corporate ERISA Pension Plans led all segments with a loss of -0.8 percent at the median, while Public Funds lost 1.7 percent and the Foundations & Endowments segment fell 2.0 percent at the median for the three months ending June 30, 2012.
"Asset allocation played a role in relative performance between the segments in the second quarter," said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services (IRAS). "Corporate ERISA plans benefited from a higher allocation to fixed income, which was up modestly while equities were down across the board. Public Fund performance suffered from a larger allocation to non-U.S. equity. Foundations & Endowments lagged the other segments mostly due to a smaller allocation to fixed income, slightly negative results for hedge funds and the poor performance of U.S. equity."
The median U.S. Equity Program in the Northern Trust Universe was down 3.9 percent in the second quarter, after gaining 13 percent in the first quarter. International equities lost more, with the median program down 7 percent in the quarter. Fixed income programs had a positive return of 2.3 percent at the median, with most of that performance coming from U.S. programs. Hedge funds returned -0.7 percent.
Asset allocation also had an impact on one-year returns, which were especially important to Public Funds that end the fiscal year on June 30. The median Public Fund gained 1.4 percent in the 12 months ending June 30, ahead of F&E, which lost 0.4 percent at the median, but behind Corporate ERISA plans, which gained 3.9 percent at the median. Public Funds have a higher allocation to international equities than other segments in the Northern Trust Universe - 16.7 percent at the median, compared to 10.7 percent for Corporate ERISA and 7.8 percent for F&E - and international equities were the worst-performing major asset class in that period. The median International Equity Program lost 13.1 percent in the 12 months ending June 30.
"Public Funds have had large allocations to international equity for the last decade, and have in recent years experienced volatility in this asset class," Frieske said. "While U.S. equity is still the largest asset class in most Public Funds, its share has dropped from 43 percent to 32 percent for the median plan in the last 10 years. Public Funds have the smallest allocation to hedge funds of any segment in our Universe, but its share has grown in the last decade from 2 percent to 9 percent at the median."
In the three-and five-year periods, as of June 30, 2012, performance results for all plans in the Northern Trust Universe are:
1 Yr 3 Yr 5 Yr
Corporate ERISA Pension Plans 3.9% 12.9% 2.4%
Public Funds 1.4% 12.1% 1.9%
Foundations & Endowments -0.4% 10.2% 1.3%
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 16 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2012, Northern Trust had assets under custody of US$4.6 trillion, and assets under investment management of US$704.3 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com or follow us on Twitter @NorthernTrust.