U.S. defined benefit pension plans posted net returns of 4.47 per cent in the first quarter of 2023, according to a report from Investment Metrics plan universe.
The performance was led by allocations to public equities, which generated 6.47 per cent during the quarter. Fixed income allocations also performed well, rising 2.93 per cent. Alternative investment allocations grew by 1.31 per cent, though the median value of real estate investments dipped 3.54 per cent.
In a press release, Brendan Cooper, a senior research consultant at Investment Metrics and the author of the report, said commercial real estate investments performed particularly badly during the quarter. “Over the last two quarters, real estate was the only negative performing major asset class with a median [loss of] 7.69 per cent. Higher interest rates and a decreasing demand for office spaces have played a role in the poor performance over this time [period].”
Corporate DB pension plans generated higher returns than public sector ones, with the median plan growing by 5.14 per cent. However, on a one-year basis, the median public sector DB plan’s returns fell by 5.5 per cent, compared to a 7.5 per cent decrease for the media corporate DB plan.
Endowment funds performed better than either DB pension plan category, with median returns of 11.43 per cent. Over the year, median endowment fund values declined roughly 3.5 per cent.