The median return of all plans in the BNY Mellon U.S. Master Trust Universe was 2.4% in the first quarter of 2015, up from 1.62% in the fourth quarter of 2014 and driven by strong returns in non-U.S. equities and real estate.
About 98% of the plans in the universe had a positive return for the quarter ended March 31, and 96% matched or outperformed the universe’s custom benchmark of 2.03%. That is an improvement over the prior quarter when only 43% of plans matched or outperformed the universe’s custom benchmark.
For the fifth consecutive quarter, corporate pension funds posted the highest quarterly median return at 2.7%, driven by higher allocations and stronger returns on U.S. fixed income, said John Houser, senior consultant for BNY Mellon’s global risk solutions group, in a telephone interview.
Following corporate pension funds were public defined benefit plans at 2.32%; foundations, 2.27%; endowments, 2.23%; health-care plans 2.08%; and Taft-Hartley plans, 1.96%.
For the universe, U.S. fixed income posted a median 1.86% return in the first quarter. Corporate plans achieved slighter higher fixed-income returns at 2.6%. Public defined benefit plans and foundations and endowments returned 1.8% and 1.62%, respectively.
Non-U.S. equity had the highest median quarterly return for the universe at 4.09%, followed by real estate, 3.18%; U.S. equities, 1.97%; U.S. fixed income, 1.86%; and non-U.S. fixed income, -1.32%.
For the year ended March 31, corporate plans were also the strongest performers with a median return of 8.55%, followed by public DB plans at 6.88%; Taft-Hartley plans, 6.74%; endowments, 6.61%; foundations, 5.95%; and health-care plans, 5.88%.
With the exception of U.S. fixed income, the universe’s median asset allocation remained relatively unchanged from the previous quarter.
The median allocation to U.S. fixed income dropped to 23% in the first quarter from 26% the previous quarter, mostly driven by public DB plans’ reduced allocations. Non-U.S. fixed income declined one percentage point to 1%. U.S. equity, non-U.S. equity, cash and alternatives/other each rose one percentage point in the quarter to 27%, 18%, 2% and 25%, respectively. Real estate remained the same at 4%.
For the one, five and 10 years ended March 31, the universe returned an annualized median 7.18%, 9.4% and 7.06%, respectively.
The universe comprises 588 defined benefit plans, foundations, endowments and health-care plans with a combined market value of more than $2.5 trillion. The average plan size was $4.2 billion.