The median corporate pension plan returned 1.0% over the first quarter of 2002, while public plans and foundation/endowment funds each had returns of 1.2%. However, most plan sponsors are using assumptions ranging from between 8% and 9%, according to Mercer Investment Consulting.
Other results from Mercer’s Summary Performance of US Institutional Portfolios survey shows that for the 12-month period ending March 31,
- corporate plans returned 3.2%,
- public plans returned 2.7%, and
- foundation/endowments funds posted a median return of 3.1%
Over a five-year time horizon, foundation/endowment funds continue to outperform both corporate and public plans by four to seven percentage points.
While plan sponsors may have to brace themselves for a third year of not hitting their targets, they can take comfort in their five and 10-year return results, which currently stand at 8.9% and 10.7%, respectively, Mercer notes.
Value and Growth
Over the period, the market favored value managers over their growth-oriented counterparts. Value managers performed in line with Mercer forecasts.
- the median large cap value manager returned 3.5%,
- while his small cap counterpart clocked a stellar return of 9.4%,
- compared to the median growth manager who’s fund fell by -2.4%
The median large cap manager performed in line with the index over the quarter and beat it by nine percentage points on an annualized basis over the last five years, Mercer reports.
The median small cap manager returned 6.2% over the three month period, outperforming his large cap counterpart who managed a meager 0.2%.
The international asset class had a relatively strong quarter, as the median international manager outperformed their US large cap counterpart by 9 percentage points, Mercer said. Within the asset class, value managers outperformed both core and growth managers by 3.3% and 3.8%, respectively.
On the debt side, the median core fixed income manager dipped slightly below the index, underperforming it by 1 percentage point, but returning in line with the Lehman Aggregate over a five-year time frame.
Benchmark YOUR results with our 2002 Defined Benefit Survey