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DEFINED BENEFIT

Wilshire TUCS, InvestorForce report 4% median gains across all plans in quarter

Plans in the Wilshire Trust Universe Comparison Service returned a median 4.02% in the three months ended March 31, the highest quarterly return in three years and up from 0.59% the fourth quarter of 2016.

The first quarter of 2017 also marks the sixth consecutive quarter of positive returns for all plan types, which is the longest stretch since June 1998, which saw 14 positive consecutive quarters.

Separately, the median first-quarter net return of MSCI's InvestorForce Plan Universes was 4.1%; the median gross return was 4.13%.

While strong quarterly performance in all major asset classes boosted plan returns across the board, diversification outside of the U.S. drove foundations and endowments and public defined benefit plans to the top of the list.

Foundations and endowments returned a median 4.38% for the quarter, according to Wilshire, followed by public defined benefit plans at 4.1%, corporate DB plans and Taft-Hartley DB plans at 3.81% each, and Taft-Hartley health and welfare funds at 2.52%.

According to InvestorForce, endowments and foundations led the plan subsets in the first quarter with a 4.6% return. Public DB plans returned 4.2% in the first quarter, while corporate DB plans returned 4.1% over the same period.

For the quarter, the MSCI ACWI ex-U.S. net and MSCI Emerging Markets indexes returned 7.86% and 11.44%, respectively, ahead of the Wilshire 5000 Total Market index, which returned 5.61%. Global real estate securities returned 5.62%, ahead of the U.S. real estate securities at 0.5%.

For the first quarter since June 2015, the classic 60% equity/40% bonds portfolio underperformed the median plan type with a quarterly return of 3.87%.

“All of those extra diversification steps paid off,” said Robert J. Waid, managing director at Wilshire Associates, in a telephone interview.

The median 4.02% return for the quarter helped drive the universe's one-year median return to 10.49%.

For the 12 months ended March 31, public funds were the best-performing plan type with a median return of 11.31%, followed by foundations and endowments at 10.89%; Taft-Hartley DB plans, 10.87%; corporate funds, 9.2%; and Taft-Hartley health and welfare funds, 6.53%.

For the year, the MSCI ACWI ex-U.S. net returned 13.13%; the Wilshire 5000 Total Market index, 18.35%; and the Wilshire Bond index, 2.92%.

Longer term, for the three, five and 10 years ended March 31, the TUCS universe returned a median annualized 5.17%, 7.3% and 5.5%, respectively.

According to InvestorForce, over the trailing one-year period, the net median plan return was 10.3% while the gross median plan return was 10.5%. Endowments performed the best over the one-year period with an 11.2% return.

The net median returns over the three- and five-year periods were 4.4% and 6.7%, respectively.

The median allocation for the InvestorForce Plan Universes as of March 31 was 29.3% fixed income, 28.7% U.S. equities, 15% non-U.S. equity, 8.7% hedge funds, 6.5% real estate, 5.4% private equity and 1% cash. The allocation values are based on weighted averages and will not add to 100%.

Wilshire TUCS includes more than 1,200 plans with more than $3.6 trillion in assets combined. MSCI's InvestorForce Plan Universes include more than 2,300 plans representing more than $3 trillion in assets.