According to the latest quarterly results from Mercer Investment Consulting, Inc., the average corporate fund returns for 249 plans tracked fell 1.1% from their 4.5% gain in the first quarter (see Mercer: 1Q06 Kind to Institutional Players ). For the 59 public funds tracked by Mercer, the average loss was 0.9%, down from a 5% first quarter gain, and the average return registered by 142 foundation/endowment funds tracked also fell 0.9%, after the 5.1% gains of the first quarter.
Second quarter returns for all institutional funds were far behind the one-year averages, which foundation/endowment plans led with an average 11.4% gain, followed closely by public plans, with an average gain of 11.3%. Corporate plans averaged a 9.6% return.
Mercer noted that among large-cap equity managers, c ore and growth benchmarks produced negative results for the quarter, while value was slightly positive. Also, over the last quarter, the median value managers outperformed their growth counterparts, and gross of management fees, over a five- and ten-year time horizon, active management outperformed passive management for all styles. The average large-cap value manager outperformed the large-cap growth manager by 390 basis points, according to Mercer. The median small-cap manager lost 4.7%, while the median large-cap manager lost 1.6%.
Among small cap equity managers, core, value and growth style benchmarks all produced negative results for the quarter. Here too, over the last quarter, the median value manager outperformed its growth counterparts, and gross of management fees, active management outperformed passive management over long-term time periods for all styles
It was a different story among international investments during the quarter, where a ll style benchmarks produced a positive return. However, the median value manager outperformed its growth counterparts, and gross of management fees, active management has outperformed passive management over long-termtime periods. However, over a five year time horizon, the growth benchmark outperformed the median growth manager, according to Mercer. The international equity asset class, as represented by the MSCIEAFE Index, gained 0.7%, outperforming its US large-cap counterpart for the quarter by a margin of 210 basis points, and on a one-year basis by 1,800 basis points.
Mercer reports that both core and core opportunistic median manager results produced a zero return for the quarter in the fixed income class. Gross of management fees, the median core opportunistic manager slightly outperformed the benchmark in Q2, while high yield median produced a zero return for the quarter. In the international fixed income category, both global and non-US fixed income benchmarks produced positive quarterly results, and gross of management fees, over a five- and ten-year time frame, active management outperformed passive management for both fixed income asset classes. Emerging market equity generated negative results for the quarter.
Within the fixed income asset class, the median core fixed income manager beat out the Lehman Brothers Aggregate(tm) Index in the second quarter by 10 basis points and on a one-year basis by 50 basis points. Over a 10-year period, the median manager has outperformed the index by 30 basis points, according to the report.