Institutional plan sponsors had investment gains of approximately 3 percent at the median in the three months ending June 30, 2017, the seventh consecutive quarter of positive investment performance, according to Northern Trust Universe data released today.
The Northern Trust Universe tracks the performance of approximately 300 large U.S. institutional investment plans, with a combined asset value of approximately $897 billion, which subscribe to performance measurement services as part of Northern Trust's asset servicing offerings.
Equities continued to drive investment returns in the Northern Trust Universe, with the median international equity program up 6 percent and median total equity program up 4.3 percent in the second quarter. Private equity programs gained 3.3 percent at the median, while fixed income and real estate were up less than 2 percent in the quarter.
Corporate ERISA plans gained 3.6 percent at the median return in the second quarter, slightly ahead of Public Funds (3.2 percent) and Foundations & Endowments (2.9 percent).
“All plan sponsor segments saw solid performance in the second quarter, and asset allocation played a different role for each type of plan,” said Mark Bovier, North America regional head of Investment Risk and Analytical Services at Northern Trust. “While Corporate ERISA plans have large allocations to fixed income, they also allocate more than other segments to high yield, emerging market debt and longer duration investment grade bonds, all of which returned noticeably more than traditional core bonds in the second quarter.”
“What worked for Public Funds was a relatively large allocation to non-U.S. equities – 16 percent for the median plan, compared to approximately 11 percent for Corporate ERISA and Foundations & Endowments. F&E plans were weighed down by relatively weak returns from alternatives,” Bovier said.
For Public Funds, the second quarter ended a strong year of investment performance. The median Public Fund in the Northern Trust Universe gained 12.7 percent at the median for the 12-month period, up from a 0.5 percent gain in the prior year. Many state and local government plans end their fiscal year on June 30.
“Public Funds have benefited from greater exposure to equities, which have been a top performing asset class over the long term,” said Bill Frieske, senior investment performance consultant, Investment Risk & Analytical Services. “Since the end of the financial crisis, in March 2009, the median total equity program in the Northern Trust Universe has returned 14.5 percent annually.”
Longer-term returns as of June 30, 2017 are as follows:
1 Yr 3 Yr 5 yr
ERISA 10.7% 5.6% 8.9%
Public Funds 12.7% 5.5% 9.1%
Foundations & Endowments 12.5% 4.6% 8.4%
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 22 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2017, Northern Trust had assets under custody of US$7.4 trillion, and assets under management of US$1.03 trillion. 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 https://www.northerntrust.com/disclosures.