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Wilshire, Northern Trust universes record ninth straight quarter of positive returns

Public DB plans lead the way as the median institutional investor gains 3.6% in the quarter

Institutional investors gained about 3.6% in the fourth quarter, said recent data from Wilshire Associates and Northern Trust.

Plans in the Wilshire Trust Universe Comparison Service returned a median 3.59% in the fourth quarter, up from a median 3.25% in the third quarter.

This quarter marks the ninth consecutive quarter of positive returns for all plan types, which is the longest stretch since the 14 consecutive positive quarters ended June 1998.

"A certain normalcy is returning to the long-term markets," said Robert J. Waid, managing director at Wilshire Associates, in a phone interview. "The variability in returns is typically driven by the equity markets, which is why we have nine positive quarters in a row of equity markets and nine positive markets in a row in the plan space."

Public defined benefit plans posted the highest median quarterly return in Wilshire's universe at 3.73%, followed by Taft-Hartley DB plans, 3.7%; foundations and endowments, 3.57%; corporate DB plans, 3.51%; and Taft-Hartley health and welfare funds, 2.76%.

Institutional investors also saw the largest one-year gain in three years, according to the TUCS data. For the year ended Dec. 31, the TUCS universe returned a median 14.72%, the highest one-year return since the 12 months ended June 30, 2014, which saw a median 15.51% return.

Public DB plans in Wilshire's universe also posted the highest median return for the year ended Dec. 31 at 15.17%, followed by Taft-Hartley DB plans, 15.06%; foundations and endowments, 14.72%; corporate DB plans, 14.61%; and Taft-Hartley health and welfare funds, 12.3%.

By asset class, the MSCI World ACWI ex-U.S. posted quarterly and one-year returns at 5% and 27.19%, respectively. The Wilshire 5000 Total Market index, meanwhile, returned 6.39% and 20.99%, over those periods, respectively, and the Wilshire Bond index, 0.89% and 4.82%.

Longer term, for the three, five and 10 years ended Dec. 31, the TUCS universe returned a median annualized 7.04%, 8.44% and 5.93%, respectively.

Meanwhile, data from the Northern Trust universe show that the median plan returned approximately 15.3% for the 12 months ending Dec. 31.

"The fourth quarter of 2017 marked the ninth consecutive three-month period of gains for institutional investors in the universe, with equities providing the foundation for positive results over that period," said Mark Bovier, regional head of investment risk and analytical services at Northern Trust, in a news release announcing the data. "All plan sponsor segments had median returns above 3% in the fourth quarter, but each segment took a different path to achieve those gains."

Public funds gained 3.8% at the median in the fourth quarter, while corporate DB plans gained 3.7%, and foundations and endowments, 3.4%.

Equities led all asset class returns in the fourth quarter of 2017, with the median U.S. equity program in the Northern Trust universe up 6.1%, followed by non-U.S. equities at 4.9% in the period. Fixed income was up 0.7% in the quarter.

Public DB plan returns were boosted by a relatively larger allocation to equities — more than half of all assets in the median allocation for the segment, according to Northern Trust. Meanwhile, corporate DB plans had the largest allocation to fixed income, but they invest heavily in longer-duration bonds and sectors that performed better than core fixed income.

Foundation and endowment returns were weighed down by relatively weak returns from alternatives, where they have the largest allocation among the three segments of institutional investors.

Corporate DB plans returned 15.7%, 7.5% and 8.8% for the one, three and five years ended Dec. 31, respectively. Public DB plans' one-, three- and five-year returns were 16.2%, 7.8% and 9.1%, respectively. Foundations and endowments returned 14.4%, 7% and 8.5% for the one, three and five years ended Dec. 31.

Wilshire TUCS includes more than 1,300 plans with more than $3.8 trillion in assets combined.

The Northern Trust universe tracks the performance of approximately 300 large U.S. institutional investment plans with more than $927.5 billion in assets combined.