Institutional Investment Plan Sponsors See Loss in Q2 2010

July 29, 2010 ( - U.S. institutional investment plan sponsors experienced a median loss of 4.7% after four consecutive quarters of positive performance, according to data in the Northern Trust Universe.

Foundations & Endowments showed a median return of -4.8% for the period ending June 30, 2010. The median return for Corporate Pension Plans was -5.0% and Public Pension Funds experienced a median return of -5.7% for the quarter. For one-year returns, Corporate Pensions were up 14.8%, Public Funds gained 13.8% and Foundations & Endowments gained 12.4% at the median over the previous 12 months.

A Northern Trust press release said losses in institutional plans were driven by the poor performance of equity markets in the second quarter. Among domestic equity universes within the Northern Trust Universe, midcap growth stocks had the strongest performance with an 8.5% loss at the median, while large-cap growth stocks had a median loss of 12%. Looking overseas, developed markets stocks lost 12% at the median, while the median emerging markets manager lost 7.5% in the quarter.

Bonds were generally in positive territory, and the median core manager gained 3% in the quarter. But risk was not rewarded: government bonds were the best returning subset, returning between 100 and 500 basis points more than comparable corporate bonds, depending on maturity, and the median high-yield manager gained just 0.3% in the second quarter, Northern Trust said.  

Alternative assets had a positive quarter. The median private equity program in the Northern Trust Universe gained 2.6% in the second quarter, while the median real estate program recorded a loss of just 22 basis points.  

The second quarter’s negative results had a significant impact on longer-term results. For the one-year period ending March 30, 2010, the median plan experienced about a 30% rate of return. That has been halved for the one-year period ending June 30. The three-year and five-year results also were trimmed by about 350 basis points and 150 basis points, respectively, from the first quarter.

The Northern Trust Universe represents the performance of about 300 large institutional investment plans, with a combined asset value of approximately $612 billion, which subscribe to Northern Trust performance measurement services.