DC Plans Saw Widespread Equity Losses in Q109

Mercer’s first-quarter 2009 Defined Contribution Universe Summary found losses in all equity markets during the period.

A Mercer news release said the balanced asset class, using a benchmark of 60% S&P 500/40% Barclays Capital Aggregate Bond Indices, posted a 6.5%-loss. International equity markets, as measured by the MSCI EAFE Index, lost 13.9% during the period.

Mercer data showed the international equity asset class underperformed U.S. equities for the quarter by 290 basis points. Global equities lost 11.9% for the quarter and outperformed international equities by 200 basis points.

According to Mercer, growth funds outperformed value funds during the first quarter, as the median large cap growth fund posted a loss of 4.7% compared to a loss of 12.9% for the median large cap value fund. The small-cap segment of the market trended in the same direction as large-cap stocks, as the median small-cap growth fund outperformed the median small cap value fund by 710 basis points.

The median large-cap fund outperformed the S&P 500 Index by 120 basis points for the first quarter. Small-cap funds underperformed their large-cap counterparts for the quarter, as the median small cap fund lost 12.9% for the quarter versus a loss of 9.8% for the median large-cap fund.

Within the international equity asset class, the median manager outperformed the MSCI EAFE Index by 130 basis points during the quarter. The median emerging markets manager lost 1.4% for the quarter and underperformed the MSCI Emerging Markets Free Index by 240 basis points, according to the Mercer data.

The median core fixed-income fund outperformed the Barclays Capital Aggregate Bond Index for the first quarter by 30 basis points. Mercer said the S&P 500 Index lost 11% during the quarter while the fixed-income asset class was flat for the quarter, with the Barclays Capital Aggregate Bond Index posting a 0.1% gain. Money-market instruments had a zero return, as measured by the three-month T-bill rate.

According to the report, capital market returns remained negative over the long term as losses during the first quarter of 2009 affected results. Over a 10-year time frame, the S&P 500 Index lost 3%, while the Russell 2000 Index gained 1.9%.

The report is available here.