Greater Diversification Improves Plan Returns

The Wilshire Trust Universe Comparison Service found all plan types’ median returns were higher in Q1 2015 than returns generated by the classic 60/40 portfolio.

Institutional assets tracked by the Wilshire Trust Universe Comparison Service (Wilshire TUCS), saw a median return of 2.13% in the first quarter.

“What’s noteworthy for this quarter is that all plan type median returns were higher than the 1.61% return for the classic 60/40 portfolio, which demonstrates that diversification into other asset classes like international equity and real estate paid off for the quarter,” says Robert J. Waid, managing director at Wilshire Associates. “It is not surprising that large plans outperformed smaller plans in the first quarter due to less exposure to U.S. equities and more to international equities. All plan types with assets greater than $1 billion had median returns of 2.31% and 7.15% for the quarter and year, respectively.”

According to the Wilshire data, corporate pension funds, overall, had a median return of 2.29% for the first quarter of 2015. The median allocation for these funds was 32.77% to U.S. equity, 8.47% to international equity, 39.33% to U.S. bonds, 2.50% to cash and 0.04% to alternative investments.

For public funds, the median return in Q1 was 2.19%. These funds had a median allocation of 43.70% for U.S. equity, 14.00% to international equity, 23.87% to U.S. bonds, 3.41% to cash, 2.67% to real estate and 1.73% to alternative investments.

Endowments and foundations, which had a median 12.66% allocated to alternative investments, returned 2.12% for the quarter. Taft-Hartley defined benefit plans returned 2.16% in Q1 and Taft-Hartley health and welfare funds returned 1.64%.