Institutional investors gained more than 7% in 2016, said data released Tuesday by Wilshire Associates and Northern Trust.
Plans in the Wilshire Trust Universe Comparison Service returned a median 0.59% and 7.24% over the three and 12 months ended Dec. 31, compared to 3.19% for the quarter ended Sept. 30 and
-0.17% for the year ended Dec. 31, 2015.
While the 7.24% return for 2016 marks the highest annual median return in three years, 2016 marks the fourth consecutive year for which the median plan type underperformed the classic 60% equity/40% bonds portfolio, which returned 10.29%. It is also the sixth consecutive quarter for which the median plan type underperformed the classic 60/40 portfolio, which returned 1.59% in the fourth quarter.
Boosted by a larger allocation to U.S. equities (median 48.3%), Taft-Hartley defined benefit plans were the top-performing plan type for the quarter with a return of 1.21%, followed by public DB plans at 0.98%; endowments and foundations, 0.64%; and Taft-Hartley health and welfare funds, 0.59%, said Robert J. Waid, managing director at Wilshire Associates, in a telephone interview.
Dragged down by a larger allocation to U.S. bonds (median 35.1%), corporate funds were the worst-performing plan type in the fourth quarter, returning, -0.37%.
Public DB plans were the top-performing plan type for the year, returning 7.77%, followed by Taft-Hartley DB plans at 7.53%; corporate plans, 7.31%; foundations and endowments, 6.8%; and Taft-Hartley health and welfare funds, 5.42%.
Over the three and 12 months ended Dec. 31, the Wilshire 5000 Total Market index returned 4.54% and 13.37%, respectively, surpassing the MSCI World ACWI ex-U.S. which returned -1.25% and 4.5% over those same periods.
Other market returns were as follows: Wilshire Bond index at -2.83% for the quarter and 5.67% for the year; Bloomberg Barclays Global Aggregate, -2.34% and 3.95%; and Wilshire Global Real Estate Securities index, -3.88% and 5.79%.
Broken out by plan size, large public plans (assets greater than $1 billion) posted an even higher median return of 7.92% for the year. These large public plans are typically more diversified into some of the subasset classes like small-cap equity, which did well in 2016, Mr. Waid said. Emerging markets equity, international equities and high-yield bonds also did pretty well in 2016, Mr. Waid said.
Longer term, for the three, five and 10 years ended Dec. 31, the TUCS universe returned a median annualized 4.32%, 8.06%, and 5.28%, respectively.
Wilshire TUCS includes more than 1,200 plans with more than $3.6 trillion in assets.
Meanwhile, institutional asset owners in the Northern Trust Universe returned a median 0.5% and 7.4% in the three months and 12 months ended Dec. 31, compared to 3.6% for the quarter ended Sept. 30 and -0.62% for the year ended Dec. 31, 2015.
Foundations and endowments were the highest-performing plan type for the quarter, returning 1%, followed by public DB plans at 0.8% and corporate DB plans, -0.8%.
Corporate plans were the highest-returning plan type for the year, returning 8.2%, followed by public funds at 7.9% and foundations and endowments, 6.6%.
In the fourth quarter, public pension funds were helped by their roughly 37% allocation to U.S. equities, which had the highest asset class return for the quarter at 4.2%, while corporate plans were hurt by a larger allocation to non-core fixed income, which declined nearly 6%, said Amy Garrigues, head of investment risk and analytical services as Northern Trust, in a news release on the results.
Among the other asset classes, the universe had a median international equity return of -1.7% for the quarter; total fixed income, -2.4%; U.S. fixed income, -2.4%; and international fixed income, -2.9%.
For the year, the universe had a median U.S. equity return of 12%; international equity, 4.7%; total fixed income, 5.6%; U.S. fixed income, 4.7%; and international fixed income, 4.5%.
The Northern Trust universe tracks about 300 large U.S. institutional plans with combined assets of $899 billion.