Median Master Trust Shows Q4 Gains, 2002 Losses

January 27, 2003 ( - The median US foundation, pension and endowment fund gained more than 4% in the fourth quarter, but still ended 2002 down almost 9%.

The median master trust gained 4.4% in the fourth quarter of 2002, reversing a loss of 9.1% seen in the third quarter (See   Median Master Trust Returns Slide 9% in Q3).    However, the fourth quarter’s winning ways were not strong enough to erase a year marred by market downturns, as the master trust ended 2002 in the red by 8.7%, according to results from the Independent Consultants Cooperative (ICC) universe of performance data on over 1,000 US pension funds, endowments and foundations.

The strong performance in the fourth quarter by ICC universe’s median master trust was attributed to the equity market turn-around and continued positive bond performance.   The quarter’s median US equity portfolio returned 6.7% in the fourth quarter, with the US bond portfolio staying on the positive side by returning 1.8%.

Despite the somber note of 2002’s returns, the ICC noted that diversification into bonds spared the portfolios from potentially larger losses in the US equity markets.  The universe’s total equity weight fell to 54.8% of assets as 2002 drew to a close , down from a recent high of 61.1% at the end of 1999.   Several factors impacted the net equity exposure of plan sponsors in the ICC universe including market losses, asset allocation policy revisions and rebalancing decisions.

Thus, the reduced weighting in stocks helped shield the Universe from the median US equity portfolio’s 21.6% decline and the median international equity portfolio’s loss of 15%.  On the other hand, the shored up bond holdings showed a gain of 9.1% by the median US bond portfolio, with the global bond portfolio chipping in a healthy 18.8% return in 2002.

Stylistic Return

The range for style return medians   widened to a 22.8% high-low spreadduring the quarter, from a much narrower 4.3% spread in the second quarter.  Overall, all six styles showed gains in the fourth quarter, with large cap value style turning in the quarter’s best performance, gaining a respectable 8.2%. On the other end of the scale was Small Cap Value, returning 4.8%, representing the lowest return for the fourth quarter.   The fourth quarter’s other style performance numbers showed gains in:

  • Mid Cap Value, up 7.0%
  • Mid Cap Growth, up 5.5%
  • Small Cap Growth, up 5.4%
  • Large Cap Growth, up 5.1%

But as was the case for the median master trust, the fourth quarter’s gains were not enough to bring 2002’s number out of negative territory.   The best performing style, Small Cap Value, only managed a loss of 7.7%.   Conversely, Small Cap Growth showed a heavy 30.5% shortfall for 2002, representing the worst performing style.   2002’s final numbers showed losses in all other style categories:

  • Mid Cap Value down 9.3%
  • Large Cap Value down 16.5%
  • Mid Cap Growth down 23.6%
  • Large Cap Growth down 26.8%
These observations are based on the Independent Consultants Cooperative database of actual accounts, which includes over 14,000 portfolios, in all asset classes, with an aggregate market value greater than $586 billion, representing the holdings of some 1,190 plan sponsors.   Sixteen consulting firms belong to the ICC.  Deutsche Bank includes its trust and custody portfolios in the ICC Universe and administers the Web-based service.