Two new reports from Wilshire Advisors and Northern Trust show institutional investors experienced positive returns for the third quarter, thanks primarily to strong domestic equity and fixed-income returns.
Institutional investors posted positive returns for the quarter ended Sept. 30, with small foundations and endowments leading the pack, data from Wilshire Advisors showed.
Plans in the Wilshire Trust Universe Comparison Service posted median returns of 5.3% and 19% for the quarter and year, respectively, ended Sept. 30.
“A shift in Fed (Federal Reserve) policy toward a gradual decline in interest rates has been supportive of positive sentiment in risk assets, but it will be challenging to facilitate stability in the economy before the pressure of higher labor costs and consumer prices lead to slowing in earnings and consumption, respectively,” said Josh Emanuel, chief investment officer at Wilshire Advisors, in a news release Nov. 6.
Emanuel said median returns among all plan types underperformed the 60% stocks/40% bonds portfolio gain of 6.1% for the three months ended Sept. 30. He also said “larger plans with smaller allocations to public equities generally underperformed smaller plans, by roughly 90 basis points.”
Small foundations and endowments (with assets of less than $500 million in assets) posted the highest returns for the quarter across all plan types, with a median return of 5.7%, while large public pension funds (with assets above $5 billion) were at the bottom of the list with a median return of 4.3%.
For the year ended Sept. 30, small public pension funds (with less than $1 billion in assets) had the highest median return at 21.9%, while large public pension funds had the lowest at 16.8%.
By asset class, the Wilshire 5000 Total Market index returned 6.2% and 35.2% for the quarter and year ended June 30, respectively. The MSCI ACWI ex-U.S. index posted respective quarterly and one-year returns of 8.6% and 25.4%. The Wilshire Bond index, meanwhile, returned a median 5.6% and 12.9% for quarter and year ended Sept. 30, respectively.
All plan median returns for the third quarter also underperformed the return of 7.7% for the multiasset Wilshire Risk Parity-12% Target Volatility index.
Separately, institutional asset owners in the Northern Trust universe posted positive returns in the third quarter, thanks primarily to strong domestic equity and fixed-income returns, posting a median return of 4.7%, data released Nov. 7 showed.
"In the third quarter, the Fed's much-anticipated rate cut was finally enacted, and institutional investors grew more optimistic as equity markets climbed, driven by solid corporate earnings and renewed confidence in the economy's growth," said John Turney, senior vice president and global head of total portfolio solutions for Northern Trust's asset servicing unit. "The quarter's strong performance across most sectors has lifted hopes for the future, painting a picture of resilient market strength."
By plan type, the corporate pension fund universe had the highest median return for the quarter ended Sept. 30, followed by the public pension fund universe at 4.5%, and the foundation and endowment universe at 4.2%.
The returns were driven primarily by strong domestic equity and fixed-income returns for the quarter, Northern Trust said. The Northern Trust U.S. Equity Program universe and Northern Trust U.S. Fixed Income Program universe delivered median returns of 6.3% and 5%, respectively, for the three months ended Sept. 30.
For the year ended Sept. 30, corporate pension funds also led with a median return of 18.1%, followed by foundations and endowments at 17.2%, and public pension funds at 16.7%.
The Northern Trust universe consists of 388 U.S. institutional funds with combined assets of more than $1.4 trillion.
