American institutional investment plan sponsors experienced modest gains in the first quarter of 2011, according to results from the Northern Trust Universe. The Universe, which represents the performance of about 300 large institutional investment plans with a combined asset value of approximately $706 billion that subscribe to Northern Trust performance measurement services, showed a Q1 median return of 3.6%.
“With these results, institutional investors have had positive median returns in three consecutive quarters and in seven of the last eight quarters,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services. “Over that two-year span, the median plan sponsor has experienced a return of 21.5%. However, this run of good returns was preceded by a six-quarter period where the median investment program lost 21%. So over the longer period, plans had a median annualized return of just under 1%.”
Public funds had a Q1 median return of 3.9%, slightly ahead of the other two segments in the Northern Trust Universe: foundations and endowments, which returned 3.7%, and corporate pension plans, which gained 3.6% in the three months ending March 31, 2011.
Northern Trust cites strong U.S. stock performance in the quarter and active management as key contributors to the results. Across all plans in the Universe, the composite allocation to U.S. equities has dropped from about 50% at year-end 2000 to about 35% in the first quarter of 2011. Fixed income allocation increased from 27% to 30% over that same time period, the composite allocation to hedge funds rose from just above zero in 2000 to 4.3% in 2011, and private equity allocation increased from 3.5% to 6%.