Northern Trust Universe Data: Institutional Investment Returns Rebound Amid COVID-19 Market Recovery

Institutional plan sponsors saw significant investment gains during the second quarter of 2020, according to the Northern Trust Universe, with a median plan return of 10.6% as markets rebounded from a massive sell-off in equities at the start of the COVID-19 pandemic in the first quarter of the year.

The Northern Trust Universe tracks the performance of more than 320 large U.S. institutional investment plans, with a combined asset value of more than $1 trillion, which subscribe to performance measurement services as part of Northern Trust's asset servicing offerings.

Public Funds had a median return of 11.14% for the second quarter, outpacing the other institutional segments tracked by Northern Trust. Corporate ERISA pension plans returned 10.55% at the median and Foundations and Endowments produced a 9.24% median return in the quarter ending June 30, 2020.

“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,” said Mark Bovier, regional head of Investment Risk and Analytical Services at Northern Trust. “Institutional plans with higher allocations to those sectors benefited from the risk exposure, while alternative asset classes trailed in relative performance during the quarter.”

U.S. equity is a core holding for most plans in the Northern Trust Universe, and the Northern Trust U.S. equity program universe reported a 22.0% median gain in the second quarter, the highest quarterly return posted this century. Another top holding for most plans, U.S. fixed income, had a median return of 4.7% for the quarter, with corporate and high yield bonds gaining 10% or more for the period.

Corporate ERISA pensions have the largest allocations to U.S. fixed income, with 36.9% of plan assets allocated to the asset class for the median ERISA plan at the end of the second quarter. The U.S. equity allocation was 28.2% of the median ERISA plan assets. The allocation to U.S. equity increased 4.6% from the prior quarter as a result of strong returns in the asset class. U.S. equity exposure has dropped from a median allocation of nearly 33% five years earlier. International equity median exposure was 9% in the second quarter.

Public Fund plans have the highest allocations to equity, with the median U.S. equity allocation at 34.2% at the end of the second quarter. International equity median exposure came to 15.5%. The median exposure to U.S. fixed income for Public Funds was 24.7%.

Foundation and Endowment plans had a median U.S. equity allocation of 28.6% in the second quarter. International equity median exposure was 9.5% and the median exposure to U.S. fixed income was 10.9%. Alternative assets are widely used in the F&E universe, with private equity and hedge fund median allocations at 15.1% and 11.6%, respectively, as of quarter end.

Despite a strong second quarter, longer-term returns for all three institutional segments were constrained by the earlier market disruption. 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.

Public Fund plans witnessed a 3.8% total plan loss year to date and a 1.9% one-year return at the median. Equities specifically saw a 7.4% YTD loss and a 0.6% gain over one year in the segment. Fixed income investment plans for Public Funds saw a 3.2% YTD return and a 6.1% one-year return.

Foundation and Endowments had a 3.6% total plan loss YTD and 2% one-year return. Equities were down 6.9% YTD for the segment, with a 1.1% gain over one year. Fixed income plans saw a 2.6% YTD return and a 4.4% one-year return in the segment.

Results of U.S. plan level universes as of June 30, 2020:

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 22 U.S. states and Washington, D.C., and across 22 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2020, Northern Trust had assets under custody/administration of US $12.1 trillion, and assets under management of US $1.3 trillion. For more than 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Please visit our website or follow us on Twitter.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Please read our global and regulatory information.

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