OREANDA-NEWS. Institutional asset owners gained a median 2.3 percent in the first quarter of 2015, according to Northern Trust Universe data.  This compares to a median gain of 2 percent in the prior year.

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

All plan types exceeded their performance from a quarter ago and recorded gains of 2 percent or greater at the median. Corporate pension plans generated the highest rate of return for the fourth consecutive quarter. Corporate ERISA plans gained a median 2.8 percent in the first quarter, while the median Public Fund was up 2.4 percent and the median Foundation & Endowment plan was up 2.1 percent. Although Foundation & Endowment plans had the smallest return at the median, their performance doubled from the fourth quarter.

“Across all plan types institutional asset owners generally continue to see gains spurred by a diverse set of drivers. For corporate ERISA plans their larger allocation to longer-duration bonds bolstered performance. For Public Funds, their larger allocation to the better performing international equities lifted them. The performance of Foundation & Endowment plans was supported by hedge funds and private equity,” said Bill Frieske, senior investment performance consultant, Northern Trust Investment Risk & Analytical Services.  “However, the first quarter was highly volatile and overall gains were largely impacted by a stronger dollar and weaker oil prices.”

Northern Trust’s findings showed:

• Corporate ERISA plan returns were helped by allocating to U.S. fixed income, particularly bonds with a longer duration profile than the other two major plan types as interest rates continued to decline.

• Public Funds were supported by a large allocation towards international equity (24 percent at the median), the best returning asset class in the quarter.

• Foundation & Endowment plan returns were boosted by a large allocation towards hedge funds (21 percent at the median).

In the first quarter international equities were the best returning asset class.  The median international equity program was up 4 percent.  Hedge funds and real estate were next at about 3 percent.  The median U.S. equity program was up 2.2 percent while the median bond program was up 1.7 percent.

Corporate ERISA plans have generally engaged on multi-year programs to lengthen the duration of fixed income securities in a drive to more closely align the duration of the assets with the duration of their liabilities. In the first quarter corporate ERISA fixed income programs returned 3 percent while Public Funds and Foundations & Endowment plans generated fixed income returns closer to 1 percent.  Mid- and small-cap stocks outperformed large cap stocks in the quarter.

Longer-term returns as of March 31, 2015 were as follows:
                                      1st Qtr 1 Yr     3 Yr      5 Yr
ERISA                               2.8%  8.3%  10.3%  10.2%
Public Funds                      2.4%  7.0%  10.3%  10.0%
Foundations & Endowments 2.1%  6.3%    9.6%    8.8%