Foundations and Endowments Hit Hardest by Q3 Market Decline

Among institutional asset owners, not a single category reported positive median returns during the third quarter, according to the Wilshire Trust Universe Comparison Service (Wilshire TUCS).

Foundations and endowments saw the greatest decline in median performance at -9.24%, while Taft- Hartley health and welfare funds had the best median return at -2.26%.

Foundations and endowments also had the worst median return for the year at 0.71%, but those foundations and endowments with assets greater than $500 million had the best one- year median return at 3.31%and a median quarterly return of -6.95%.

“In a quarter where equity exposure pulled down total plan returns, Taft-Hartley health and welfare funds were rewarded for the large exposure to debt with a median allocation to bonds of 75.66%, which easily outpaced the next largest median bond allocation segment of 36.71% for corporate funds,” said Robert J. Waid, Managing Director, Wilshire Analytics.

“The overall results across Wilshire TUCS are not surprising given the fact that battered by worries over a worldwide economic slowdown, a headline-grabbing downgrade of United States Treasury debt and the ongoing European debt crisis, the global stock markets took a tumble during the third quarter of 2011 with the Wilshire Global Total Market IndexSM falling -20.66%,” added Waid. “Here in the U.S., the stock market fell in all three months of the third quarter, with the Wilshire 5000 Total Market IndexSM returning -15.04% for the three month period.”

For all master trusts included in Wilshire TUCS, the median quarterly and annual median returns were -8.64% and 1.42%, respectively. The master trusts with greater than $1 billion in assets had a quarterly median return of -8.01% and a one-year median return of 2.44%. The largest plans with $5 billion or more tallied a median quarterly return of -8.27%and a 12-month media return of 2.66%.

Among public pension plans, those with assets of more than $5 billion and those with greater than $1 billion both saw median returns of -8.53% for the quarter while all public pension funds showed a median return of -8.94%. The biggest public plans had the best annual median return at 2.38% trailed by those with assets greater than $1 billion with a median return of 1.95$. All public pension plans fared less well coming in with a one-year median return of 1.31%.

Among corporate plans, the best quarterly and annual returns were seen by those with assets greater than $1 billion with median performances of -6.24% and 3.21% respectively. In the category that includes all corporate plans the median returns were -7.94% for the quarter and 1.98% for the year.

Consistent with a double-digit negative quarter for equity managers, all the equity style Wilshire TUCS return medians fell from -15.06% for large growth portfolios to -20.69% for small growth portfolios. For the year ending September 2011, large growth portfolios had the strongest performance, eking out a 1.38%, whereas small value portfolios showed the weakest performance at -4.21%.