Modest First Quarter Gains for Institutional Plan Sponsors

CHICAGO--(BUSINESS WIRE)--

Positive gains across all asset classes helped institutional plan sponsors gain a median return of approximately 2 percent in the first quarter of 2014, according to Northern Trust Universe data.

The Northern Trust Universe tracks the performance of about 300 large U.S. institutional investment plans, with a combined asset value of approximately $899 billion, which subscribe to Northern Trust performance measurement services.

Institutional plans benefited from continued gains in domestic equity and fixed income, in addition to modest gains in the international equity and fixed income markets. Median returns in the first quarter were led by the corporate ERISA plans with a return of 2.8 percent. Public Funds followed next, netting a gain of 1.9 percent. Rounding out the top 3, Foundations & Endowments posted a return of 1.6 percent. Corporate ERISA plans recorded their third consecutive quarterly gain, while Public Funds and Foundations & Endowments generated positive returns for the seventh straight quarter.

“Compared to the fourth quarter of 2013, plan sponsors continued to see positive gains but at a slower rate. All asset classes saw positive returns, with private equity, real estate, and domestic fixed income performing the best,” said Bill Frieske, senior performance consultant, Northern Trust Investment Risk and Analytical Services. “Modest but sustained growth, especially in the equity and fixed income sectors globally, helped propel institutional plan sponsors to another positive quarter.”

Asset allocation per segment was as follows:

• Public Funds were weighted towards U.S. equity (32.7 percent) and international equity (22.9 percent)
• Foundations & Endowments were weighted towards private equity (23.3 percent) and U.S. equity (20.2 percent)
• Corporate ERISA plans were weighted towards U.S. fixed income (36.8 percent) and U.S. equity (29.3 percent)

The U.S. fixed income and real estate sectors provided plan sponsors with modest gains in the first quarter. Overall, the best performing investment program in the Northern Trust Universe was the private equity program, which returned 4.2 percent in the quarter at the median. The median real estate investment program returned 2.8 percent, while the U.S. fixed income program returned 2.2 percent. Domestic equity, the largest asset class in most plans, returned 1.6 percent and international equity returned 0.6 percent.

Volatility, particularly in the international equity sector, helped to moderate overall gains. Corporate ERISA plans, with their heavy weighting towards U.S. fixed income and U.S. equity investment programs, managed to perform slightly better than their counterparts. Public funds did second-best in terms of overall return, due in part to relatively flat returns from international equity markets. Despite a relatively large allocation to private equity, Foundations & Endowments were dragged down by the more modest performance of domestic equity. Foundations & Endowments also had a significant allocation towards international equity at 12.6 percent and domestic fixed income at 12.1 percent, which helped to dampen the overall gain for the segment.

Declining interest rates coupled with decelerating earnings growth in the U.S. and continued sluggish growth abroad created a good environment for bonds in the first quarter. High yield debt was the best returning subset of fixed income, rising 3 percent, while emerging market debt was next at 2.8 percent.

Mid-cap managers had the best returns in the first quarter. Mid-cap managers returned 2 percent at the median while large-cap managers returned 1.7 percent. Small-cap returns came in at 0.8 percent for the quarter.

Returns by segment for longer periods as of March 31, 2014 were:

					1st Qtr				1 Yr				3 Yr				5 Yr
Corporate ERISA					2.8%				11.0%				9.3%				15.1%
Public Funds					1.9%				12.9%				9.3%				14.7%
Foundations & Endowments					1.6%				12.2%				8.1%				13.4%

About Northern Trust

Northern Trust Corporation NTRS is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 states, Washington, D.C., and 18 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2014, Northern Trust had assets under custody of US$5.8 trillion, and assets under investment management of US$915.4 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com or follow us on Twitter @NorthernTrust.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at http://www.northerntrust.com/disclosures.