The third quarter of 2018 brought positive investment performance, as the median return of 2.4% for institutional asset owners followed year-to-date gains at 3.3%, according to Northern Trust Universe Data.
Public Funds and Foundations & Endowments each had median returns of 2.4% in the third quarter, with Corporate ERISA (Employee Retirement Income Security Act) plans trailing behind at 1.9%, due to their allocation towards longer duration fixed income—an investment sensitive to interest rate hikes, according to Bill Frieske, senior investment performance consultant of Investment Risk and Analytical Services at Northern Trust. Despite this lag, Northern Trust overall marks the performances as optimistic.
“Third-quarter performance rolled along nicely, with solid returns from domestic equities and alternative asset classes driving results for institutional plan sponsors,” says Mark Bovier, regional head, Investment Risk and Analytical Services. “U.S. equities were up mid-single digits in the quarter while hedge fund investment programs in the Northern Trust Universe returned approximately 8.5% at the median. Fixed income programs, a core holding for most institutional investors, gained a more modest 0.4 %, owing mostly to a rising rate environment.”
ERISA plans saw a one-year gain of 5.2%, a three-year gain of 9.0% and a five-year gain of 7.4%. Corresponding performance for Public funds was 7.4%, 10.0% and 7.9%, respectively, while for Foundations & Endowments they were 7.6%, 9.0% and 7.4%, respectively.