Pension Returns Rack Up Red Ink in 2001: Mercer

February 7, 2002 ( - Slumping fund returns left pension plans reporting a negative return for 2001, a survey of plan sponsor performance finds.

The survey by William M Mercer Investment Consulting revealed that, for the year ending December 31, 2001, against a benchmark performance of -6.1% the median:

· corporate plan saw assets shrink by -4.7%,
· public plan returned -4.8%, and
· foundation/endowment plan returned -4.2%
The negative performance for 2001 occurs after median returns in 2000 barely broke into positive territory. Nevertheless, long-term results still remain strong, with assets increasing by between 8% and 9% over a five-year time frame, Mercer reports.

Asset Class

According to Mercer, the median large cap manager outperformed the benchmark by 0.7 percentage points in 2001, for total annual return of -11.2%.  The median large cap value manager significantly outperformed his counterpart in large cap growth, the former returning -1.7% against the latter’s -19.6%. 

Small cap managers continued their run of good performance, the median small cap manager returning 5.6% over the last year against a benchmark return of 2.5%. Here too value managers outperformed growth managers.

International equities remained in the doldrums, the median international manager returned -19%, but still beating the MSCI EAFE, which returned -21.4% over the year. Once again, value funds outperformed growth funds.

On the fixed income side, the median core bond manager equaled the return of the Lehman Aggregate over the last one- and three-year time frames, returning 8.4% and 6.3%, respectively, Mercer reports.