Institutional Investors See Strong Returns in 2021

Public funds bested corporate funds thanks to higher equity allocations.

Institutional investors posted positive returns in the fourth quarter of 2021, topping off a strong year.

The median return for institutional asset owners included in the Northern Trust “All Funds Over $100 Million” plan universe was 3.5% for the quarter and 14.4% for the one-year period. Institutional assets tracked by Wilshire Trust Universe Comparison Service, meanwhile, posted an all-plan median return of 3.96% for the fourth quarter and 13.33% for the year.

“All plans benefited from the strong rally in asset prices across most segments of the global securities market in 2021,” says Jason Schwarz, president and chief operating officer of Wilshire. “U.S. equity exposure was a dominate driver of performance in 2021, as plans with the largest allocations to U.S. equities outperformed.”

U.S. equities, represented by the FT Wilshire 5000 Index, rose 9.58% in the fourth quarter and 26.70% for the year. Meanwhile, international equities, represented by the MSCI AC World ex U.S., rose 1.82% in the fourth quarter and 7.82% for the year. U.S. bonds, represented by the Wilshire Bond Index, rose 0.59% for the quarter and gained 0.14% for the year.

Across all plan types, quarterly median gains ranged from 2.80% to 4.57% for large corporate funds (assets above $1 billion) and public funds, respectively, according to Wilshire. One-year median returns ranged from 6.26% to 16.79% for large corporate funds (assets above $1 billion) and very large public funds (assets above $5 billion), respectively.

The Northern Trust Universe tracks the performance of 380 large U.S. institutional investment plans, with a combined asset value of more than $1.4 trillion, which subscribe to performance measurement services as part of Northern Trust’s asset servicing offerings.

The Northern Trust Corporate Employee Retirement Income Security Act universe median return for the quarter was up 2.9%. The Northern Trust Foundation and Endowment universe produced a 3.2% median return for the quarter, while the Northern Trust Public Funds universe median return was up 3.8%.

The Northern Trust U.S. equity program universe produced an 8.1% median return for the quarter. The S&P 500 large-cap index was up 11.0% for the three-month period, Northern Trust says. The Russell 1000 large-cap index returned 9.8% compared to the Russell 2000 small-cap index, which returned 2.1% for the period. The large-cap growth segment had the strongest quarterly performance in the U.S. public equity market for the second consecutive quarter, where the Russell 1000 Growth index returned 11.6% during the quarter. 

The Northern Trust ERISA universe plan median one-, three- and five-years returns were 7.9%, 14.3% and 10.4%, respectively. The U.S. fixed-income asset class remains the largest ERISA plans allocation at a median allocation of 44.8%, which represents a 10% increase over the past 10 years. The range in the universe’s fixed-income asset class allocation between the top and bottom quartile is more than 40%.

The Northern Trust Public Funds universe median multi-period returns for the one-, three- and five-year periods came in at 14.3%, 14.7% and 11.1%, respectively. Public funds’ median fourth quarter allocations to U.S. and international equity are 33.0% and 14.8%, respectively. The median exposure to U.S. fixed-income for public funds is 20%.

The Northern Trust Foundations and Endowments universe plan’s median one-, three- and five-years returns were 16.6%, 15.9% and 11.8%, respectively. The Foundation and Endowment plan’s median U.S. equity allocation was 21.5% in the quarter. The median allocation to private equity is 20.8%, a 100% increase over the past five years, according to Northern Trust.