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Good quarter but bad year for US instos

Northern Trust's survey of its American not-for-profit institutional clients found strong performance in the June quarter but year-to-date returns are still negative at pension funds and the like.

Public funds -- which have about 50% in equities -- reported a median return of 11.14% in the three months to June but year-to return date segments stand at -3.8%.

Corporate ERISA [Employee Retirement Income Security Act] pension plans returned 10.55% at the median in June quarter. Median ERISA pension plan had 37% of its total assets in US fixed income.

Foundations and endowments reported 9.24% median return for the quarter and -3.6% YTD. This category uses alternative assets extensively, with substantial median allocations to private equity (15.1%) and hedge funds (11.6%).

The numbers are based on 320 large US institutional investment plans totaling over US $1 trillion in assets which use Northern Trust's performance measurement services.

"Investors' willingness to take on additional risk propelled returns in the equity and corporate fixed income sectors, bringing those markets close to their all-time highs by the end of the second quarter," Northern Trust regional head of investment risk and analytical services said Mark Bovier.

"Institutional plans with higher allocations to those sectors benefited from the risk exposure, while alternative asset classes trailed in relative performance during the quarter."

Northern Trust noted longer-term returns for all three institutional segments were constrained by the earlier market disruption, despite a strong June quarter.

"With June 30 marking the end of the fiscal year for many public funds and university endowments, one-year median returns for those segments hovered in the low single digits," it said.

Read more: Northern Trustpublic funds
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