Institutional Investors See Low Returns Again in Q2
“Weak international returns contributed to a median plan return that underperformed the 60/40 portfolio in the second quarter and for the year ending June 30, 2016," says Robert Waid with Wilshire Associates.
Institutional assets tracked by
the Wilshire Trust Universe Comparison Service (Wilshire TUCS) saw a
median return of 1.89% for all plan types in the second quarter and a
median one-year gain of 0.91%.
“Weak international returns
contributed to a median plan return that underperformed the 60/40
portfolio in the second quarter and for the year ending June 30, 2016.
The Wilshire 5000 Total Market Index returned 2.78% in the second
quarter and 2.96% for the year. The MSCI EAFE for international
developed market equities lost 1.46% in the second quarter and 10.16%
for the year,” says Robert J. Waid, managing director, Wilshire
Associates. “Bond returns were solid with the Wilshire Bond Index
gaining 3.24% in the second quarter and 6.82% for the year.”
Corporate
funds experienced a 2.21% return for the second quarter and 1.64% for
the year. Public funds returned 1.85% in Q2 and 1.07% for the year.
Foundation and endowments saw a second quarter return of 1.83% and an
annual loss of 0.26%, while Taft-Hartley pension plans returned 1.84%
for the quarter and 1.04% for the year.
“Though all plan-type
categories had positive quarterly median returns, most categories
experienced only small positive median returns for the year,” Waid says.
“This was the fourth quarter in a row where the 60/40 portfolio beat
the median plan return.”
In the second quarter and for the year
ending June 30, 2016, larger corporate funds outperformed smaller
corporate funds, while smaller public funds and foundations and
endowments outperformed their larger counterparts on both a quarterly
and annual basis. Large foundations and endowments continue to have a
significant exposure to alternatives with a median exposure of 40.20%,
which significantly contributes to the performance difference, Wilshire
says.
All plan types with assets greater than $1 billion had
median returns of 2.02% in the second quarter and 1.51% for the year,
compared to plans with assets less than $1 billion which had median
returns of 1.85% in the second quarter and 0.73% for the year.
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BMO Global Asset Management Expands Stable Value Fund
BMO Global Asset Management has expanded the availability of
its BMO Stable Value Fund, formerly known as the BMO Employee Benefit Stable
Principal Fund, to outside recordkeepers and other 401(k) providers.
Previously, the fund was available to only plan sponsors with an existing
relationship to BMO Harris Bank N.A.
The BMO Stable Value Fund is meant to meet the needs of plan
sponsors looking to replace money market funds with other ultra-short term bond
strategies.
“This change is
designed to meet the needs of more and more plan sponsors as they continue to
look for easily accessible products that can provide more yield than a
traditional money market fund,” says Christopher Barlow, national director of Defined Contribution Investments
for BMO Global Asset Management (GAM).
He added, “The BMO
Stable Value Fund provides those plan sponsors with an attractive alternative
for the growing number of plan participants who are looking for conservative
investments. It also demonstrates our sustained commitment to our Stable Value
and Defined Contribution Investment business.”
The fund seeks to maintain a net asset value of $1 per
share, the company says. It will be managed by portfolio managers Don
McConnell and Katie DellaMaria. BMO GAM manages $233 billion and offers 45
mutual funds to U.S. investors.
The BMO Stable
Value Fund adds a collective-trust option to its suite of 45 mutual funds available
to U.S. investors. It is an addition to the existing family of money market
funds, which includes the BMO Institutional Prime Money Market Fund, the BMO
Prime Money Market Fund, the BMO Tax-Free Money Market Fund and the BMO
Government Money Market Fund.
You can learn more
about the BMO Stable Value Fund here.
NEXT: American Funds Launches Two New Fixed Income Funds
American Funds Launches Two New Fixed Income Funds
American Funds is offering investors two new fixed income
funds—the Corporate Bond Fund and Emerging Markets Bond Fund.
The Corporate Bond Fund will invest at least 80% of its
assets in corporate bonds and invest exclusively in investment-grade
securities, the company says. The Emerging Markets Bond Fund will invest at
least 80% of its assets in securities of emerging-markets issuers including
sovereign debt and debt of companies located in or with substantial business in
emerging markets.
Three portfolio managers on the Emerging Markets Bond Fund each have more than 20 years of experience in emerging-market debt,
according to American Funds.
With the addition of these two investment vehicles, American
Funds now offers 17 fixed income funds.
NEXT: Franklin Templeton
Investments Offers New Global Macro Strategies Fund
Franklin Templeton
Investments Offers New Global Macro Strategies Fund
Franklin Templeton
Investments has launched the Franklin K2 Global Macro Opportunities Fund, which
will invest in a variety of global macro strategies and be sub-advised by multiple
strategy managers.
The liquid-alternative fund will aim to provide capital
appreciation over a full market cycle by allocating the fund’s assets across
global macro-focused investment strategies, which are generally concentrated on
discovering macroeconomic investment opportunities across numerous markets and
investments. The fund’s allocations to
these strategies and sub-advisers will reflect the portfolio management team’s
top-down market views.
“Against the backdrop of increased global macroeconomic and political
uncertainty, many U.S. investors are potentially taking on more equity risk
than their goals would dictate, and may be open to looking for new ways to
diversify their investment portfolios,” says Rob Christian, a portfolio manager
and senior managing director for K2 Advisors, part of Franklin Templeton
Solutions. “Global macro strategies can
serve as a tool that may help provide diversification benefits in relation to
equity markets, especially during periods of market stress.”
This U.S.-registered fund will
add to the firm’s liquid alternative
offerings, which include the Franklin K2 Long Short Credit Fund, and the Franklin K2 Alternative Strategies Fund.
“With the introduction
of the Franklin K2 Global Macro Opportunities Fund, we can now offer retail
investors access to additional potential sources of total return,” says Brooks
Ritchey, a portfolio manager and senior managing director for K2 Advisors. “For
investors looking to complement their overall portfolios with a solution that
historically has offered lower correlation to equity markets and a diversified,
multi-manager approach, we believe this Fund can be an important tool. We
are very excited about the potential utility of this fund in helping equity
investors seek to manage investment portfolios through volatile market periods.”
The fund
will allocate its assets to a variety of hedge strategy managers selected by K2
Advisors through a rigorous, proprietary due diligence process. The strategies
employed by the initial hedge strategy managers may include discretionary and
systematic macro strategies.
The Fund’s initial set of
sub-advisersincludes Aspect
Capital Limited (Systematic), Emso Asset Management Limited (Discretionary) and Graham Capital Management (Systematic).
More information
about the fund can be found here.