Northern Trust Universe Data: Institutional Plans Start 2019 with Solid Performance

Institutional plan sponsors rebounded with solid investment performance in the first quarter of 2019, following losses in the fourth quarter of 2018, according to Northern Trust Universe data released today.

The median return of 7.8 percent in the first quarter marked the ninth-best quarterly median return in the past 20 years for plans in the Northern Trust Universe. U.S. equities were the major driver of results, with the median domestic equity program in the Northern Trust Universe gaining 14.0 percent in the quarter. International stocks chipped in, as the median non-U.S. equity program returned 10.5 percent in the quarter.

“A strong start to 2019 helps institutional plans recover from a rough 2018, when the median plan in the Northern Trust Universe had negative performance after equity markets tumbled in the fourth quarter,” said Mark Bovier, regional head of Investment Risk and Analytical Services at Northern Trust. “Looking at longer-term performance, the first-quarter of 2019 marks the first 10-year period that will not include the effects of the Global Financial Crisis of 2008. For asset owners in the Northern Trust Universe, the median 10-year return improves by 150 basis points, to 10.1 percent from 8.6 percent over that period.”

Of the three institutional groups tracked by Northern Trust, Corporate ERISA pension plans had the best first quarter on a relative basis. The median ERISA plan was up 8.3 percent while the median Public Fund was up 7.8 percent and the median Foundation & Endowment (F&E) gained 7.0 percent.

“ERISA plans benefited in the first quarter from a larger allocation to domestic equities, longer-duration bonds and little exposure to alternative assets,” said Bill Frieske, senior investment performance consultant, Investment Risk and Analytical Services. “Domestic equities were the best-returning asset class in the first quarter, while bonds were solid and alternatives, including private equity and hedge funds, had flat returns in the quarter.”

The median ERISA total fixed income program was up 6.6 percent in the first quarter. That was about 300 basis points better than the more core duration fixed income programs in Public Funds and F&E’s.

Public Funds also benefited from a large allocation to equities, which make up more than half of the holdings in the median plan. Public Funds also have relatively large allocations to alternatives – nearly 12 percent in the median plan – and that weighed on performance as returns for alternatives were flat in the first quarter.

Large allocations to alternative assets the primary cause of relatively lower returns for F&E plans. The median F&E plan had a 25 percent allocation to private equity and hedge funds in the quarter.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 20 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2019, Northern Trust had assets under custody/administration of US$10.9 trillion, and assets under management of US$1.2 trillion. For more than 125 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit northerntrust.com or follow us on Twitter @NorthernTrust.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at http://www.northerntrust.com/disclosures.

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