The first quarter marked the second consecutive gain for institutional asset owners after two consecutive losses beginning in the second quarter of 2015, with plan sponsors gaining approximately 0.7 percent at the median. Since 1998, the average first quarter median return has been 1.1 percent.

The Northern Trust Universe tracks the performance of about 300 large U.S. institutional investment plans, with a combined asset value of approximately $899 billion that subscribe to performance measurement services as part of Northern Trust’s asset servicing offerings.

Corporate ERISA plans had the best performance in the quarter with a return of 2.2 percent at the median, while Public Funds were second returning 1 percent. Foundation & Endowments finished third with a return of 0.1 percent at the median. Public Funds and Foundations & Endowments recorded reduced gains compared to the previous quarter.

“Having the smallest exposure to equities was a key factor behind the relative outperformance of corporate ERISA plans,” said Bill Frieske, senior investment performance consultant, Northern Trust Investment Risk & Analytical Services. “Another factor helping corporate ERISA plans was the longer duration of their fixed income programs.”

“Corporate pension plans generally have been lengthening the duration of their fixed income programs, while at the same time increasing their allocation relative to Public Funds and Foundations & Endowments. The first quarter saw interest rates decline pushing up returns for long duration bonds,” Frieske added.

In the fourth quarter of 2015, equities performed well while bonds lagged. The opposite was true in the first quarter. Bonds generally outperformed stocks in the first quarter as interest rates edged downward. The median total fixed income segment was up 3 percent and the U.S. fixed income segment was up 2.8 percent. The median total equity program and U.S. equity program were both essentially flat. However, there was wide variance in equity segment returns with the median emerging market equity manager up 5.5 percent, while the median non-U.S. developed equity manager was down 1.5 percent.

Northern Trust’s findings generally showed:

  • Corporate ERISA plan returns were bolstered by a large allocation to U.S. fixed income (34 percent at the median).
  • Public Fund returns were dampened by a large exposure to U.S. equities (36 percent at the median), offset by a significant allocation to U.S. fixed income (22 percent at the median).
  • Foundations & Endowment returns were muted by U.S. equities (28 percent allocation at the median).

Longer-term returns as of March 31, 2016 are as follows:

 

1st Qtr

  

1 Yr

  

3 Yr

  

5 yr

ERISA 2.2% -1.1% 5.9% 7.0%
Public Funds 1.0% -1.0% 6.0% 6.7%
Foundations & Endowments 0.1% -2.4% 5.1% 5.7%

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 20 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2016, Northern Trust had assets under custody of US$6.2 trillion, and assets under management of US$900 billion. 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 http://www.northerntrust.com/disclosures.