Institutional Investors See Gains in Q3 2010

U.S. institutional investment plan sponsors returned to positive performance in the third quarter of 2010, with a median gain of 8%, according to data in the Northern Trust Universe.

Corporate pension plans and public pension plans each gained 8.8% at the median, while Foundations & Endowments and Wealth Management clients had median returns of 7.4%. Northern Trust said much of the difference in performance could be attributed to the larger allocations to alternative assets by F&E and Wealth clients.   

The composite allocation to private equity and hedge funds was close to 40% for F&E and Wealth, while Corporate Plans and Public Funds had less than 10% in those two asset classes, according to a news release. Third quarter returns for Private Equity and Hedge Fund programs in the Northern Trust Universe were less than 3%, trailing the Total Equity Program, which gained nearly 13% in the quarter.  

“In the third quarter, the median Corporate Plan in our Universe had a 35% allocation to fixed income, up from 27% five years ago. In that same period, the median allocation to domestic equities dropped from 50% to 38%,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services, in the announcement. “Plans appear to be paying greater attention to matching their assets and liabilities in to reduce risk as they address the funded status of their pension plans.”  

The Northern Trust Universe represents the performance of about 300 large institutional investment plans, with a combined asset value of approximately $630 billion, which subscribe to Northern Trust performance measurement services.