Institutional Plans Up in Q3, But…

November 15, 2007 (PLANSPONSOR.com) - Institutional plans continued to gain ground in the third quarter - but may have given much of that back this month, according to a new report.
By PS

The median corporate, public and foundation/endowment plan experienced positive results for the third quarter of 2007, according to a quarterly survey of plan sponsor performance by Mercer. However, many gains were erased during the first half of November as the market continued to react negatively to subprime mortgage concerns which have led to a tightening of credit and liquidity.

According to Mercer’s Summary Performance of US Institutional Portfolios survey, the median corporate plan had a third-quarter gain of 2.2%. Public plans and foundation/ endowment funds gained 2.3% and 2.4% during the quarter, respectively.

On a one-year basis, corporate plans had average gains of 14.9%, while public plans and foundation/endowment plans earned 16.0% and 16.9%, respectively. Over a 10-year timeframe, all three plan types have averaged between 7.8% and 8.8% on an annualized basis, according to Mercer.

Better Value?

According to Mercer’s analysis, both value and growth managers produced positive results during the third quarter, with the median large cap growth manager outperforming its value-oriented counterparts by 540 basis points. The median core large cap manager underperformed the S&P 500® Index during the third quarter by 20 basis points but outperformed the index by 130 basis points on an annualized basis over the last 10 years. The median core large cap manager outperformed its small cap counterpart by 500 basis points over the current quarter. The median core large cap manager gained 1.8% while the median core small cap manager lost 3.2%.

The international equity asset class, as represented by the MSCI EAFE Index, gained 2.2%, outperforming the S&P 500 Index, its US large cap counterpart, for the quarter by a margin of 20 basis points and outperforming on a one-year basis by 850 basis points, according to Mercer.   Local currency stock market returns in Europe and Japan were negative, but positive for the Asia Pacific excluding Japan region. A weakening US dollar aided total returns in all three regions.

Within the international asset class, the median growth manager outperformed its value counterpart by 420 basis points.

Fixed Income

Within the fixed income asset class, the median core fixed income manager underperformed the Lehman Brothers Aggregate Index in the third quarter by 10 basis points, but outperformed the index on a one-year basis by 20 basis points. Over a 10-year period, the median manager has outperformed the index by 20 basis points.

During the quarter, the median core opportunistic manager underperformed the Lehman Brothers Aggregate Index by 30 basis points but outperformed the index by 20 basis points on a one-year basis. The median high-yield manager posted a 0.8% return for the quarter, according to the report.

In assessing international fixed income performance, the median non-US manager had a quarterly gain of 7.7% while the median global manager gained 5.9% over the same period. Over a 10-year period, the median managers in both universes outperformed their respective benchmarks.


Summary Performance of US Institutional Portfolios is published quarterly by Mercer.  Summary Performance of US Institutional Portfolios   may be downloaded free of charge from www.mercer.com . Please note: All   performance is measured in US dollars, before investment management fees are deducted.

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