Northern Trust Shows US Institutional Investors Enjoyed Strong Returns in 2010

(January 27, 2011) — The Northern Trust Universe, which represents the performance of about 300 large institutional investment plans with a combined asset value of approximately $650 billion, had a second consecutive year of positive returns in 2010.

“The performance of US equities and active management seemed to pay off in 2010,” William Frieske, senior performance consultant at Northern Trust Investment Risk & Analytical Services, told aiCIO, noting that equity-heavy plans, such as corporate funds, outperformed foundations and endowments that tend to rely more heavily on private equity and hedge funds. “The lack of performance from hedge funds and private equity compared to publicly traded equities has been surprising,” he said. According to the data, the one-year return for hedge funds was 9.2% at the median while the median private equity program was up 13.7% for the same period.

The study showed that corporate pensions had the strongest performance, advancing 13.9% at the median. Meanwhile, the median public fund category was up 13.6% with the median plan in the foundations & endowments segment gaining 12% for the 12 months ending December 31, 2010.

“I think one of the biggest trends we’re observing is that plans are moving toward higher fixed-income allocations to better line up their liabilities with their assets,” Frieske said, reflecting a trend in funds embracing liability-driven investment approaches and underscoring how pension fund managers have adjusted and improved their risk management techniques to weather the economic crisis.