The median return of all plans in the Wilshire Trust Universe Comparison Service and BNY Mellon Trust Universe and was -0.84% and -0.83%, respectively, for the third quarter of 2014, the first negative quarter since the second quarter last year.
U.S. corporate defined benefit plans were the best performers in Wilshire’s universe, returning a median -0.6% for the third quarter. By comparison, Taft-Hartley defined benefit pension plans returned a median -0.86%; foundations and endowments, -0.92%; and public defined benefit plans, -1%.
The Wilshire 5000 Total Market index and Barclays Capital U.S. Aggregate bond index returned 0.08% and 0.17%, respectively, for the quarter.
“In a relatively flat, yet positive quarter for U.S. equities and U.S. bonds at 0.08% and 0.17%, respectively, all plan types and size categories had negative median returns,” said Robert J. Waid, managing director at Wilshire Associates, in an e-mail. “This was another quarter where the simple 60/40 allocation beat the diversified portfolio … however, this time it was not because of strong U.S. equities performance. The cause in this case was that the standard diversifiers underperformed while U.S. bonds led the way with a small 0.17% gain,” Mr. Waid wrote.
For the year ended Sept. 30, public DB plans led with a median return of 10.17%, followed by Taft-Hartley DB plans at 10.10%, corporate DB plans at 9.86%, and foundations and endowments with 9.24%.
For the one-, three-, five- and 10-year periods ended Sept. 30, the universe posted median returns of 9.43%, 12.5%, 9.7% and 6.99%, respectively.
In the BNY Mellon Trust Universe, endowments posted the top median return for the quarter at -0.46%. Corporate DB plans returned a median -0.73%; Taft-Hartley DB plans, -0.87%; public DB plans, -1.06%; and foundations, -1.18%.
“Plans that assumed more risk were penalized (in the third quarter) as broad equities and global bonds were significant underperformers,” John Houser, senior consultant at BNY Mellon, in an e-mail. “Endowments had a low weighting (10%) to non-U.S. equity holdings relative to the Master Trust universe weight of (17%),” Mr. Houser said.
For the third quarter, non-U.S. fixed income, U.S. equity and non-U.S. equity had median returns of -3.51%, -0.58% and -4.8%, respectively, compared with benchmark returns of -5.38%, 0.01% and -5.79%, respectively. Real estate and U.S. fixed income were up 2.46% and 0.08%, but 17 and 25 basis points below their benchmarks, respectively, the BNY Mellon report said.
For the year ended Sept. 30, corporate DB plans and endowments were the top performers, with median returns of 10.72%, each, followed by public DB plans, 10.14%; foundations, 9.87%; and Taft-Hartley DB plans, 8.82%; BNY Mellon said.
For the one-, five- and 10-year periods ended Sept. 30, the universe returned a median 10.16%, 9.95% and 7.27%, respectively.
The universe’s median asset allocation saw slight changes from the previous quarter in U.S. equities, U.S. fixed income, alternatives and cash. U.S. equities and U.S. fixed income decreased to 26% from 27%, each; alternatives increased to 24% from 23% and cash increased to 2% from 1%. Non-U.S. equities, real estate and non-U.S. fixed income remained the same at 17%, 4% and 1%, respectively.
Wilshire TUCS includes nearly 1,600 plans with more than $3.7 trillion in assets.
The BNY Mellon Trust Universe consists of 685 plans that have a combined market value of more than $2.5 trillion, with an average plan size of $3.6 billion.