Northern Trust Universe Reveals Positive News for US Institutional Investors

(November 1, 2010) — US pensions, endowments, and foundations in the Northern Trust universe have reported a median 8% gain for the third quarter — a rebound from the median 4.7% loss three months earlier.

“It’s turning out to be a roller-coaster year for institutional plan sponsors, with strong returns in the third quarter following losses in the second quarter and moderate gains in the first quarter,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services, in a statement. “As a result of these quarterly swings, volatility in institutional plan performance has nearly doubled over the past two years.”

The median gain for endowments and foundations, which reported a composite alternatives allocation of close to 40%, came to 7.4%, according to the firm. Corporate and public pension plans, with composite alternatives allocations of less than 10%, posted median gains of 9.1% and 8.8%, respectively. For the 12 months through September 30, corporate pension plans have posted the biggest median gain of 11.5%, followed by public plans, with 10.4%, and endowments and foundations, with 9.6%.

“Over the longer term, corporate plans have been allocating more assets to fixed income and less to equities,” Frieske stated. “In the third quarter, the median corporate plan in our Universe had a 35% allocation to fixed income, up from 27% five years ago. In that same period, the median allocation to domestic equities dropped from 50% to 38%. Plans appear to be paying greater attention to matching their assets and liabilities in to reduce risk as they address the funded status of their pension plans.”

The Northern Trust Universe represents the performance of about 300 large institutional investment plans, with a combined asset value of approximately $630 billion, which subscribe to Northern Trust performance measurement services.