Institutional Investors End Streak of Positive Returns in Q3

October 31, 2011 ( - Northern Trust announced that U.S. institutional investment plan sponsors lost 9% at the median in the third quarter of 2011, ending a streak of four consecutive quarters with positive results.

According to data from the Northern Trust Universe, Corporate ERISA Pension Plans had the strongest third-quarter performance of all segments, with a loss of 7.5% at the median. Corporate ERISA plans benefited from higher allocations to fixed income than the Public Funds and Foundations & Endowments segments, which tallied losses of 9% each at the median.   

A press release said Fixed Income Programs in the Northern Trust Universe gained 2.1% in the third quarter while both U.S. and non-U.S. equities posted steep losses. The median U.S. Equity Program was down 16.2% for the quarter, while International Equity Programs lost almost 20%.   

U.S. Equity Program managers trailed the Russell 3000 Index of U.S. stocks by about 90 basis points in the third quarter, as active managers primarily struggled during the time period to outperform their respective benchmarks. In alternative asset classes, Real Estate was up 0.6% and Private Equity gained 3.2%, while Hedge Funds lost 2.7% for the three months ending September 30.   

“Institutional Plan Sponsors endured another tough third quarter, with weak equity returns driving the losses,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services, in the press release. “Based on observations over the last 15 years, our Universe database has shown that the third quarter has historically been the lowest performing quarter during the calendar year. For example Public Funds have had an average median loss of 0.7% in the third quarter over the last 15 years. That compares to average gains of almost 5% in the fourth quarter, 0.8% in the first quarter and 3.1% in the second quarter for those funds during the same respective period.”  

The Northern Trust Universe represents the performance of about 300 large institutional investment plans, with a combined asset value of approximately $641.1 billion, which subscribe to Northern Trust performance measurement services.