SANTA MONICA, Calif. — Broad diversification paid off for foundations and endowments last year, as they once again outperformed their corporate and public pension plan peers, according to data from Wilshire Analytics' Trust Universe Comparison Service.
Foundations and endowments returned a median 14.1% for the year, according to the Wilshire TUCS, which includes more than 1,450 plans with a combined $2.8 trillion in assets. Corporate pension funds returned a median 13.4% for the year, while the median return for public pension funds was 13.2% for 2006. In 2005, foundations and endowments returned a median 8.7%; corporate plans, 7.63%; and public plans, 7.55%.
The one-year median return for all master trusts in the universe was 13% for the year ended Dec. 31, compared with 7.6% for the previous year.
Of all funds with more than $1 billion in assets, foundations and endowments had the best performance returning 14.8% for 2006. That compares with 8.6% the previous year. Large corporate plans returned 14.2% for 2006, compared with 8.6% the previous year, and large public plans returned 14.3% last year, compared to 7.9% the year before, according to Wilshire.
Steven Foresti, managing director at Wilshire, attributed last year's stronger performance numbers across all universes to stronger overall performance in the equity market. "The lion's share of plans' exposure is in equity or equity-like investments," which translates into stronger performance overall, he said. "In 2005, we saw positive returns, but it wasn't a blowout year for equities."
The Russell 3000 returned 15.7% for the year ended Dec. 31, compared with 6.1% in 2005; the Lehman Aggregate bond index returned 4.3% in 2006, compared with 2.4% the previous year; and the Morgan Stanley Capital International Europe Australasia Far East index returned 26.86% for 2006 vs. 14.02% for 2005.