Institutional asset owners in the Northern Trust universe posted a median return of -4.2% in the third quarter, after returning -9.1% in the second quarter, data released Wednesday showed.
While the quarter ended Sept. 30 was the third consecutive period with negative returns, it represented a slight improvement over the quarter ended June 30. That quarter had been the worst since the first quarter of 2020, when markets were slammed by the economic impact of the COVID-19 pandemic, and it was the second worst in the past decade, said a news release announcing the data.
Despite a market rally during the first half of the third quarter, the sell-off resumed in the second half to sink the quarter into negative territory, the news release said.
"Many key economic indicators are now projecting the growing likelihood of a recession, and inflation still weighs heavily on equity markets in the U.S. and Europe," said Amy Garrigues, Northern Trust's global head of investment risk and analytical services, in the news release.
The news release cited investor response to the Federal Reserve raising interest rates by 75 basis points each in June and September for the Northern Trust domestic equity program universe returning a median -4.4% during the third quarter.
Foundations and endowments performed the least poorly among plan types with a median return of -3.5% for the three months ended June 30, followed by public defined benefit plans at -3.8% and corporate pension plans at -6.4%.
For the one, three and five years ended June 30, foundations and endowments in Northern Trust's universe returned a median annualized -10.8%, 6.4% and 6%, respectively; public pension funds, -10.9%, 4.5% and 4.7%; and corporate pension plans, -20.2%, zero and 2.8%.
The Northern Trust universe consists of 373 U.S. institutional funds with combined assets of more than $1.13 trillion.
