Active management in traditional asset classes took a back seat to passive strategies, according to the latest survey by Pensions & Investments of the nation's 200 largest retirement plans.
Defined benefit plan assets in traditional equity strategies decreased more than 10% overall, with active portfolios taking the brunt of the decline, both domestically and abroad, in the 12 months ended Sept. 30.
U.S. equities overall decreased 10.7%, with active portfolios down 13.1% and passive assets down 9.3%.
This compares with a 10.2% drop in overall international equities for the period, with active international dropping 16.6% and international passive strategies, a mere 0.9%. Adjusting for market returns, international active assets fell 8.5% while international passive grew 8.7%.
Developed markets investments saw the biggest spread between active and passive, with active strategies down 14.7%, or a market-adjusted -6.4%, while passive developed market assets saw an increase of 14%, or 25% on a market-adjusted basis.
Emerging markets equity assets fell on an absolute basis for both active and passive, but grew 1.48% and 8.1%, respectively, when adjusted for market returns.
(For the 12 months, the Russell 3000 index returned 0.54%, the MSCI Europe Australasia Far East index, -8.87%; the MSCI World, -3.81%; and the MSCI Emerging Markets index, -16.08%.)
It was a similar story for fixed income, where overall assets decreased 5.6%, and U.S. investments dropped 6.5% for the year ended Sept. 30. Passive U.S. bonds fell 2.1% and active, 8.8%.
The Florida State Board of Administration, Tallahassee, had the largest shift to passive U.S. bonds from active among funds reporting that data. Active domestic bonds at the $120.8 billion Florida board decreased to $10.6 billion from $20.4 billion with a corresponding shift in passive, to $16.7 billion from $6.2 billion, during the survey period.
“Strategically, we view our fixed-income asset class as our anchor to windward,” said Dennis MacKee, director of communications for the Florida board. “A more passive fixed-income approach will help us to better weather future major market disturbances and provide us with a source of liquidity for rebalancing needs, capital calls and benefit payments.”