2009 Ends up a Good Year for Institutional Investors

January 26, 2010 (PLANSPONSOR.com) - U.S. Institutional investment plan sponsors realized strong double-digit returns in 2009, with a solid fourth quarter capping a year of extreme highs and lows in investment performance, according to data in the Northern Trust Universe.

Corporate pension plans had the highest returns for the year, up 22.3% at the median for the 12 months ending December 31, 2009, according to a press release. Public funds returned 20.3% and foundations & endowments gained 17.9% for the full year.

In the fourth quarter, public funds led with a 3.7%-gain at the median, while foundations & endowments and corporate pension plans posted median returns of 3.6% and 3.3%, respectively.

Returns in 2009 were driven by higher-risk asset classes, Northern Trust said. In U.S. equities, small-cap growth stocks outperformed large-cap stocks, with the Russell 2000 Growth Index returning 34.5% compared to the Standard & Poor’s 500 Index return of 26.5%. For non-U.S. stocks, emerging markets (79% return for the MSCI Emerging Markets index) out-gained developed markets (32.5% for the MSCI EAFE index) for the 12-month period. In fixed income, high yield was the best returning subset, up 58% for the year Barclays Capital High Yield Index.

The performance of alternative assets was mixed in 2009. The Hedge Fund segment in the Northern Trust Universe gained 20% for the year, while the Private Equity segment lost almost 5%. Higher allocations to private equity by foundations & endowments likely contributed to the lower overall returns for these institutional investor plans for 2009 compared to corporate and public plans.

“Regardless of differences in performance between corporate pension, public fund and F&E segments, a median return of 19% for all plans ranks 2009 as one of the best years in more than a decade for institutional investors,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services, in the press release.

The Northern Trust Universe represents the performance results of more than 300 large institutional investment plans, with a combined asset value of approximately $626 billion, which subscribe to Northern Trust performance measurement services.