Corporate funds outshone other institutional investors in the second quarter, with a median return of 10.93% helped by the recent market rally.
The median return for all master trusts in the second quarter was 9.77%, according to the Wilshire Trust Universe Comparison Service. Hilarie Green, managing director and head of Wilshire Analytics' performance reporting division, noted that corporate funds benefited from a high allocation in equities.
The median equities allocation for corporate funds was 53.55%, according to TUCS. That topped the median equities allocation of 52.2% for all master trusts.
“It was an up quarter just because of the market,” Ms. Green said in a phone interview.
Institutional investors in general showed improved performance in the second quarter but remained in negative territory for the 12 months ended June 30. The median 12-month return for corporate funds was -16.84%, according to TUCS. For all master trusts, the median return was -17%.
In comparison, public funds were up 10.86% for the quarter but down 17.06% for the year; foundations and endowments rose 10.66% for the quarter and declined 19.14% for the year; Taft-Hartley funds showed a median return of 7.55% for the second quarter but -16.08% for the 12 months.
TUCS, which is compiled by Santa Monica, Calif.-based Wilshire Analytics, the investment technology arm of consultant Wilshire Associates Inc., has a universe of more than 1,100 plans representing $2.04 trillion in assets.
Although the median return for Taft-Hartley funds took less of a hit than other sponsor types for the year, they underperformed for the quarter in part because of their exposure to real estate, Ms. Green said. The TUCS study showed the median real estate allocation for Taft-Hartley funds was 9.04%, compared with only 0.44% for all master trusts.
At the same time, Taft-Hartley funds had a lower exposure to equities compared with other sponsor types — 47.84% — and thus did not enjoy as much of a lift from the market rally.
Ms. Green further pointed out that foundations and endowments might have felt a drag on their returns for the year given their lower median allocation to bonds, 23.26%, compared with the corporate fund median allocation of 35.02% and public funds' 32.53%.
Ms. Green noted that for the year, the Standard & Poor's 500 stock index was down 26.2% while the Barclays Government Credit index was up 5.26%
Foundations and endowments “didn't get the protection that corporate and public funds had because of their bond allocation,” she said. However, in the second quarter, the S&P 500 was up 15.93% while the Barclays index was up only 1.86% so “having a higher allocation in equity would have helped relative to the fixed income,” Ms. Green said.
In terms of size, master trusts with more than $1 billion in assets outperformed master trusts with less than $1 billion in the second quarter, with median returns of 10.45% and 9.39%, respectively.
Ms. Green attributed the difference in performance to a lower median bond allocation by the larger master trusts in the second quarter. And while both larger and smaller master trusts had similar median allocations to equities, the larger ones had a higher median alternative investments allocation.
Exposure to international equities also might have boosted returns for larger master trusts. According to TUCS, funds with more than $1 billion had a median asset allocation of 14.63% in international stocks while funds with less than $1 billion had a median 10.36%.
Ms. Green noted that in the second quarter, the Morgan Stanley Capital International Europe Australasia Far East index was up 25.4%. “If you had more in international, it could have helped you a lot,” she said.
Other findings from TUCS include:
c For all master trusts with more than $1 billion in assets, the median return was -18.13% for the year. Corporate funds in that grouping had a median return of 10.32% for the second quarter and -17.7% for the year. Larger public funds returned a median 10.87% in the quarter and -18.76% for the 12 months. Foundations and endowments with more than $1 billion returned a median 10.87% and -17.06% for the respective periods, while Taft-Hartley funds returned 10.22% and -18.11%, respectively.
c For all master trusts with less than $1 billion in assets, the median return was -16.56% for the year. Corporate funds in this universe reported a median quarterly return of 11.45% and -16.52% for the year. Public funds returned a median 10.86% for the quarter and -15% for the 12 months. Foundations and endowments with less than $1 billion, returned 10.71% and -19.19%, in the respective periods, while Taft-Hartley funds in this group returned 7.32% and -15.94% for the year.
