Institutional Plan Returns Continue to Lag 60/40 Portfolio
Institutional assets tracked by the Wilshire Trust Universe Comparison Service (Wilshire TUCS) saw a median return of 1.89% for all plan types in the second quarter and a median one-year gain of 0.91%.
“Weak international returns contributed to a median plan return that underperformed the 60/40 portfolio in the second quarter and for the year ending June 30, 2016. The Wilshire 5000 Total Market Index returned 2.78% in the second quarter and 2.96% for the year. The MSCI EAFE for international developed market equities lost 1.46% in the second quarter and 10.16% for the year,” says Robert J. Waid, managing director, Wilshire Associates. “Bond returns were solid with the Wilshire Bond Index gaining 3.24% in the second quarter and 6.82% for the year.”
Corporate funds experienced a 2.21% return for the second quarter and 1.64% for the year. Public funds returned 1.85% in Q2 and 1.07% for the year. Foundation and endowments saw a second quarter return of 1.83% and an annual loss of 0.26%, while Taft-Hartley pension plans returned 1.84% for the quarter and 1.04% for the year.
“Though all plan-type categories had positive quarterly median returns, most categories experienced only small positive median returns for the year,” Waid says. “This was the fourth quarter in a row where the 60/40 portfolio beat the median plan return.”
In the second quarter and for the year ending June 30, 2016, larger corporate funds outperformed smaller corporate funds, while smaller public funds and foundations and endowments outperformed their larger counterparts on both a quarterly and annual basis. Large foundations and endowments continue to have a significant exposure to alternatives with a median exposure of 40.20%, which significantly contributes to the performance difference, Wilshire says.
All plan types with assets greater than $1 billion had median returns of 2.02% in the second quarter and 1.51% for the year, compared to plans with assets less than $1 billion which had median returns of 1.85% in the second quarter and 0.73% for the year.