90% of ICC Master Trusts Brought Negative 2Q Returns

August 3, 2006 (PLANSPONSOR.com) - The Independent Consultants Cooperative (ICC), a consortium of investment consulting firms, said the median master trust in its universe fell by 1%, and 90% of the master trusts earned negative returns for the second quarter.

Public funds experienced the highest median return among the various sponsor types of -0.9% for the quarter, only 30 basis points higher than the lowest median return of -1.2% for Endowments and Foundations, according to the ICC data. Corporate funds came in at -1.1% and Taft Hartley pensions, -1%.

ICC explained that the relatively higher median returns for the second quarter among Public funds and Taft-Hartley pensions could be due to higher average allocations to fixed income and large cap equity investment instruments, and lower allocations to small cap equity instruments.

The steepest decline in median portfolios was registered by International Emerging Markets Equity with a -4.5% return followed by US Equity with a -2.8% return. US Bond and International Developed Markets Equity median portfolios turned in flat returns. Global Bonds was the only class earning a positive median return of 2.4%.

ICC attributes the poor second quarter performance to rising energy prices, draining of liquidity worldwide by Central Banks, the rise in global interest rates and the unwinding of highly leveraged carry trade positions, all of which compounded market volatility.

Within domestic equity styles, large cap outperformed small cap across the value/growth style spectrum in the second quarter, and value consistently outperformed growth across market capitalization ranges. Large Cap Value was the best performer, although turning in a flat performance, and Small Cap Growth was the worst performer with a -5.5% median return.

From a domestic fixed income perspective, core fixed income domestic bonds were essentially flat in the second quarter. They outperformed high yield domestic bonds which had a median performance of -0.5%.

The ICC universe includes 21,000 portfolios spanning all asset classes, and holds an aggregate market value of $1.7 trillion.