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  2. ASSET OWNERS
November 08, 2016 12:00 AM

InvestorForce, Northern Trust universes record strong gains in the third quarter

Meaghan Offerman
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    Institutional investor returns rose by more than 3% in the third quarter, said data released Tuesday by Northern Trust and MSCI.

    Institutional asset owners in the Northern Trust Universe returned a median 3.6% in the three months ended Sept. 30, marking the fourth consecutive quarter of positive returns, and up from 1.9% in the second quarter.

    Foundations and endowments were the highest performing plan type for the quarter, returning 3.7%, followed by public defined benefit plans at 3.6% and corporate DB plans at 3.4%.

    Foundations and endowments benefited from a smaller allocation (median 12.4%) to domestic fixed income, while public funds were boosted by a median 16% allocation to non-U.S. equity.

    The universe posted a median fixed-income return of 1.4% for the quarter, the weakest return of all major asset classes. International equities and U.S. equities returned a median 6.9% and 4.8%, respectively, by comparison.

    During the quarter, the Dow Jones Total U.S. Stock Market index advanced 4.4% and the MSCI ACWI ex-U.S. index gained 6.3%, while the Barclays U.S. Aggregate Bond index was up 0.5%.

    For the year ended Sept. 30, corporate DB plans were the top performer, returning a median 11.6%, followed by public plans at 9.8%, and foundations and endowments at 7%. For the three and five years ended Sept. 30, corporate plans returned 7.3% and 9.9%, respectively; public plans, 6.4% and 9.9%; and foundations and endowments, 5.3% and 8.6%.

    Meanwhile, the median net return of MSCI's InvestorForce Plan Universes was 3.3% during the third quarter, up from 1.77% in the second quarter. The median gross return over the period was 3.4%, up from 1.86% last quarter.

    Over the trailing one-year period, the median net return was 8.6%, while the annualized trailing three- and five-year median net returns were 5% and 8.2%, respectively.

    Endowments led with a median net return of 3.7% in the third quarter. The median defined benefit plan returns were up a net 3.4%. Public DB plans were ahead of corporate DB plans — 3.4% vs. 3.3% over the period.

    The median allocation for all trust funds as of Sept. 30 was 29% fixed income, 28.3% U.S. equities, 14.4% non-U.S. equity, 8.8% hedge funds, 6.4% real estate, 5.9% private equity and 1.2% cash. The allocation values are based on weighted averages and will not add to 100%.

    The Northern Trust universe tracks about 300 large U.S. institutional plans with combined assets of $899 billion; 2,052 plans supplied gross returns for the InvestorForce universes and 1,844 provided net returns.

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