Institutional asset owners in the Northern Trust universe posted positive returns in the fourth quarter, with a median return of 4.9%, data released Monday showed.
It was the first positive quarter of the year thanks to positive equity and fixed-income returns for the period. The first three quarters of 2022 were all negative, and the cumulative result was an overall median return of -12.7% for the year ended Dec. 31.
"Institutional investors remained focused on inflation and interest rates during the fourth quarter of 2022, and although central banks continued to raise interest rates to fight inflation, there are signs that inflation and interest rate increases will decelerate in 2023," said Amy Garrigues, Northern Trust's global head of investment risk and analytical services, in a news release. "With hope that central bank interest rate hikes will be less frequent in 2023, investors started looking for opportunities to lock in higher yields, driving positive returns for the quarter."
The news release cited investor response to cooling inflation for the uptick in market returns. The consumer price index year-over-year increase dropped to 7.1% in November from 9% in June, which led to the Northern Trust domestic equity program universe gaining a median 8.1% during the fourth quarter.
Public pension plans had the highest median return for the three months ended Dec. 31 at 5.1%, followed by corporate pension plans at 4.4%, and foundations and endowments at 4.2%.
For the one, three and five years ended Dec. 31, public pension plans in Northern Trust's universe returned a median annualized -10.1%, 4.5% and 4.9%, respectively; foundations and endowments, -10.7%, 5.9% and 5.7%; and corporate pension plans, -18.5%, 0.2% and 2.8%.
The Northern Trust universe consists of 368 U.S. institutional funds with combined assets of more than $1.17 trillion.