Institutional investors saw their median returns drop in the third quarter, data from Wilshire Associates and Northern Trust show.
Plans in the Wilshire Trust Universe Comparison Service posted median returns of 1% and 4.58% for the third quarter and year ended Sept. 30, respectively. Wilshire previously reported median returns of 3.2% and 6.5% for the second quarter and year ended June 30, respectively.
"The significant decline in interest rates boosted performance of bonds and other interest rate sensitive assets, including defensive equities during (the) third quarter," said Jason A. Schwarz, president, Wilshire Analytics and Wilshire Funds Management, in a news release. "Despite strong year-to-date performance, the sell-off in global equities during fourth quarter 2018 is weighing on the trailing performance for most institutional plans."
Corporate defined benefit plans posted the highest median quarterly return in Wilshire's universe, at 1.12%, followed by public pension plans, at 1.09%; Taft-Hartley pension plans, 1.07%; Taft-Hartley health and welfare funds, 0.91%; and foundations and endowments, 0.84%. For the year ended Sept. 30, corporate DB plans and Taft-Hartley health and welfare funds both returned 5.23%; Taft-Hartley DB plans, 4.81%; public plans, 4.78%; and foundations and endowments, 4.08%;
By asset class, the MSCI ACWI ex-U.S. index posted quarterly and one-year returns of -1.8% and -1.23%, respectively. The Wilshire 5000 Total Market index, meanwhile, rose 1.23% and 2.95% over those periods, respectively, and the Wilshire Bond index, 2.86% and 11.77%.
Longer term, for the three, five and 10 years ended Sept. 30, the TUCS universe returned a median annualized 7.67%, 6.21% and 8.03%, respectively.
Separately, institutional asset owners in the Northern Trust universe returned a median 0.8% in the third quarter, said data released Oct. 31. Northern Trust previously reported that the median plan returned about 3.1% for the quarter ended June 30.
Corporate defined benefit plans posted the highest quarterly median return among plan types at 2.3%, followed by public DB plans at 0.7%, and foundations and endowments at 0.4%.
For the 12 months ended Sept. 30, corporate plans also posted the highest median return at 8.8%, followed by foundations and endowments at 4%, and public plans at 3.5%.
For the three and five years ended Sept. 30, corporate plans in Northern Trust's universe returned an annualized 8.1% and 7%, respectively; foundations and endowments, 8.1% and 6.6%; and public funds, 7.7% and 6.6%.
"Asset class diversification helped institutional investors to generate positive returns in the third quarter, with fixed income playing a key role," said Mark Bovier, North America regional head of investment risk and analytical services at Northern Trust, in a news release. "U.S. equity programs, the largest allocation in most plans in the Northern Trust Universe, had a median return of 0.7% in the quarter, while the median return for international equity programs was -1.5%. Meanwhile, the U.S. fixed-income program universe median return was up 2.1% for the quarter. The 10-year Treasury note yield dropped from 2.0% to 1.7% during the quarter, putting upward pressure on bond prices."
The median private equity program gained 12.6% in the third quarter, while hedge funds were up 11.1%.
The Northern Trust universe consists of about 300 large U.S. institutional plans with combined assets of about $1.08 trillion.
