Large Taft-Hartley Plans Benefit from Alternatives

May 29, 2013 ( – The median return for large Taft-Hartley defined benefit plans was 5.13% in first quarter, versus 6.04% for small plans, according to Wilshire TUCS.

However, the performance difference over the last 12 months and last 10 years has been consistently in the other direction, with median returns of large Taft-Hartley plans besting those of small Taft-Hartley plans for seven out of the past 10 years. The 10-year median returns for large and small plans are 8.19% and 7.13%, respectively. 

Wilshire Consulting says the difference might be due to the fact that large Taft-Hartley defined benefit plans continue to be more likely to invest in alternatives and have a larger exposure to equity-like assets.  

Ninety-four percent of large Taft-Hartley plans are invested in alternative investments, with a median allocation of 12.9%, while only 27% of small plans are invested in alternatives, with a median allocation of 5.1%. Real estate shows a similar trend, with 81% of large Taft-Hartley plans with an allocation to real estate compared to 44% of small plans. In addition, 92% of large plans with real estate investments also had exposure to other alternative investments, while only 36% of small plans invested in real estate had exposure to other alternative investments.  

Looking at overall asset allocation, large Taft-Hartley plans also invest in more equity-like assets than small plans, at 72% and 61%, respectively. Large Taft-Hartley plans have less allocation to U.S. equities but significantly more exposure to international equities and alternative investments.