Wilshire TUCS: Corporate DB records best quarterly, yearly gains among tepid returns

The Wilshire Trust Universe Comparison Service returned a median 1.89% in the second quarter of 2016, up from 1.13% in the first quarter.

The second quarter of 2016 marks the fourth consecutive quarter in which the median plan type underperformed the classic 60% equity/40% bonds portfolio, which returned 2.96% for the quarter.

Once again, the best-performing plan type for the quarter was corporate defined benefit plans, which returned 2.21%, followed by public DB plans at 1.85%; Taft-Hartley DB plans, 1.84%; foundations and endowments, 1.83%; and Taft-Hartley health and welfare funds, 1.22%.

“Though all plan-type categories had positive quarterly median returns, most categories experienced only small positive median returns for the year,” said Robert J. Waid, managing director at Wilshire Associates, in a news release.

For the 12 months ended June 30, corporate plans had the highest median return at 1.64%, followed by Taft-Hartley health and welfare funds at 1.37%; public funds, 1.07%; Taft-Hartley DB plans, 1.04%; and foundations and endowments, -0.26%.

The TUCS universe returned a median -0.91% for the year, and annualized returns of 6.2%, 6.3% and 5.67%, respectively, for the three, five, and 10 years ended June 30. The traditional 60/40 portfolio of stocks and bonds returned 4.5% for the year.

Weak international returns contributed to underperforming the 60/40 portfolio in the quarter and year, said Mr. Waid. The Wilshire 5000 Total Market index returned 2.78% for the second quarter and 2.96% for the year, and the MSCI EAFE, -1.46% and -10.6%, respectively. For the year, the Wilshire 5000 index, a domestic small-cap equity index, and the Wilshire U.S. Microcap index returned -3.99% and -12.01%, respectively.

Additionally, for the year ended June 30, endowments and foundations were hampered by a higher allocation to alternative assets, most of which did not perform well during the period, Mr. Waid said in a telephone interview. For instance, the S&P GSCI, a commodity index, returned -26.08% over the year. Foundations and endowments with assets greater than $500 million had a median alternatives allocation of 40.2% for the quarter.

Bond returns were more positive with the Barclays U.S. Aggregate Bond index returning 3.24% for the quarter and 6.82% for the year.

Public DB plans had the highest median international equities allocation for the quarter at 11.06%. Taft-Hartley health and welfare funds had the highest median U.S. bond allocation at 40.27%. Corporate DB plans had the second highest U.S. bond allocation at 38.62% and the second lowest international equities allocation at 6.92%.

The Wilshire TUCS universe includes more than 1,200 plans with more than $3.6 trillion in assets.