Institutional asset owners in the Northern Trust universe returned a median 1.9% in the second quarter, marking the third consecutive quarter of positive returns, and up from a median 0.7% in the first quarter, data released Tuesday showed.
Since 1998, the average second-quarter median return of the universe has been 1.7%, according to Northern Trust.
For the second consecutive quarter, corporate defined benefit plans posted the highest quarterly return at a median 3%, followed by public DB plans at 1.7%, and foundations and endowments at 1.5%.
Corporate DB plans were also the top performer for the 12 months ended June 30, returning 2.6%, followed by public DB plans at 0.5%, and foundations and endowments at -1.4%.
“Differing returns across plan types were driven largely by the duration of their fixed-income investments,” said Bill Frieske, vice president and senior investment performance consultant for Northern Trust's investment risk and analytical services group, in a news release. “In an effort to derisk their defined benefit pension plans, corporate ERISA plan sponsors have been lengthening the duration of their fixed-income programs. Interest rates declined in the second quarter, which increased returns for long-duration bonds and helped boost corporate ERISA plan returns.”
Corporate DB plans also benefited from a smaller allocation to international equities, the lowest-returning major asset class for the quarter at a median -0.2%.
The universe also posted quarterly median U.S. equity and fixed-income returns of 2.2% and 2.6%, respectively, and a median private equity return of 0.2%. Private equity was the second-lowest-returning major asset class in the second quarter, and dragged down foundations and endowments, which had a significant allocation to private equity.
Longer term, for the three and five years ended June 30, corporate DB plans returned 7.5% and 7.4%, respectively. During the same periods, public DB plans returned 6.9% and 6.8%, respectively, and endowments and foundations, 5.7% and 5.8%.
The Northern Trust universe tracks about 300 large U.S. institutional plans with combined assets of about $899 billion.
