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Institutional Plan Investments Regain Traction in Q4

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Institutional investment plans of all types rebounded at least five percentage points in the fourth quarter compared with the previous three-month period, Northern Trust Universe reported Thursday.

Assets owned by public funds, foundations and endowments, and corporate ERISA plans gained a median 2%, up from a median 4.6% loss in the third quarter.

The Northern Trust Universe tracks the performance of some 300 large U.S. institutional investment plans, with a combined asset value of approximately $899 billion. These subscribe to performance measurement services as part of Northern Trust’s asset servicing offerings.

Public funds enjoyed the best fourth-quarter performance with a return of 2.7% at the median. Foundations and endowments followed, returning 1.9%. Corporate ERISA plans reported a median return of 1.8%.

“The driver for the relative strength of public funds was their larger allocation to equities,” Bill Frieske, senior investment performance consultant, Northern Trust Investment Risk & Analytical Services, said in a statement.

“Public funds had a 57% allocation to equities at the median compared to 45% for corporate ERISA plans and 42% for foundations and endowments.”

Frieske noted that Russell 3000 gained 6.3% in the fourth quarter, and the MSCI EAFE 4.8%.

Northern Trust’s research showed that corporate ERISA plan returns were dampened by a 38.1% allocation to U.S. fixed income and a 7.4% investment in private equity. Long-duration bonds lost nearly 1% in the fourth quarter, and private equity was basically flat.

Foundation and endowment plan returns were hurt by a 23.9% allocation to private equity. But they got a boost from a 19.4% exposure to domestic equities and 12.2% investment in international equities.

Northern Trust said corporate pension plans continued to transfer assets from equity to fixed income investments.

Public funds continued to move money into private equity and international equity. Their median allocation to private equity rose from 1.6% in December 2014 to 5% currently.

Foundations and endowment plans reduced their allocation to fixed income from 16% to 11%, while continuing to allocate to hedge funds and private equity.

Following are institutional plan long-term returns as of Dec. 31:

Public funds

4th quarter: 2.7%

1 year: 0.3%

3 year: 7.6%

5 year: 7.5%

Foundations and endowments

4th quarter: 1.9%

1 year: -0.3%

3 year: 7.1%

5 year: 6.4%


4th quarter: 1.8%

1 year: -0.8%

3 year: 6.8%

5 year: 7.3%

— Check out Why Institutional Investors Are Embracing ETFs  on ThinkAdvisor.