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Portfolio > Mutual Funds > Equity Funds

Pensions, Endowments Reap Best Quarterly Returns Since 2014

By Janet Lorin, Martin Z. Braun

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After a grueling year for performance, large U.S. university endowments and public pensions saw a bounce in the fiscal first quarter.

University endowments with more than $500 million in assets and pension funds with more than $1 billion each gained a median 3.7 percent in the first quarter through Sept. 30, according to results published Wednesday by Wilshire Trust Universe Comparison Service, a database provided by Wilshire Associates.

Global equities, fixed income and real estate helped bolster the performance for endowments and pensions of all sizes, the strongest since the second quarter of 2014, according to Wilshire.

Rolling Off

“You roll off a bad quarter and you roll on a good quarter and you’re going to have a good year,” said Robert Waid, managing director for the analytics arm of Wilshire Associates. “That’s what this really translates into.”

Universities rely on endowments to help fund operations, and spending often is dictated by an average of three or five years of returns. 

Endowments focus on long-term investing, so one quarter or one year often won’t have large implications. Yet most university funds in fiscal 2016 were handed their first losses since the 2009 recession, when the funds declined a median 21.8 percent.

Schools with a fiscal year that ends later than June 30 captured the performance upswing at the start of the quarter. At Aug. 31, when Northwestern University completes its year, the endowment gained 1.9 percent. For the June 30 time period, the Evanston, Illinois school said its $9.6 billion endowment had an investment loss of 2.5 percent.

Private Equity

Most public pension funds look to make at least 7 percent. Institutional assets, which include endowments, foundations and public and corporate pensions of all sizes, saw a median gain of 3.2 percent in the first quarter, gross of fees, according to Wilshire.

The median public pension fund with more than $5 billion has almost 70 percent of assets invested in U.S. and international stocks and alternative investments such as private equity and hedge funds, according to Wilshire.

Endowments with more than $500 million had almost 7 percent of their assets in cash. The largest allocation is in alternatives, almost half, with the majority in private equity.

The Wilshire service reports quarterly on 1,300 funds with about $3.6 trillion in assets under management.

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