2008 Proved 'Dismal' for Institutional Investors

January 23, 2009 (PLANSPONSOR.com) - The median institutional plan in the Northern Trust Universe lost a quarter of its value during a "dismal" 2008, according to the latest Northern Trust data.

According to a Northern Trust news release about its fourth-quarter and year-end data, the median plan posted a 25% loss for 2008, including a 13.1% loss in the fourth quarter. Foundation/Endowment funds gave up 13.7% for the final quarter and 25.4% for the year, while Public Funds lost 13.6% and 26.6% and Corporate funds gave back 12.9% and 26.6%, the announcement said.

“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, in the announcement. “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 shows 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, enjoyed 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 Foundations & Endowments plan had an 11% allocation to private equity, while the median Corporate plan allocated less than 1% to the asset class.

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.







Public Funds



Corporate ERISA



Source: Northern Trust