Institutional Plans Report Best Quarter in over 33 Years

Large plans underperformed small plans, likely due to significant exposure to alternative investments.

Institutional assets tracked by the Wilshire Trust Universe Comparison Service (TUCS) earned an all-plan median return of 11.07% for the second quarter and 3.36% for the fiscal year ending June 30. It was the best quarter for the TUCS plans since the first quarter of 1987—but, of course, the fourth quarter of that year is an entirely different story.

Quarterly median gains across all plan types ranged from 7.90% for public funds with assets above $5 billion to 12.43% for foundations and endowments. And one-year median returns spanned from 2.37% for public funds with assets over $1 billion to 6.63% for corporate funds with assets over $1 billion.

Large and small plan types underperformed the 12.52% return achieved during the second quarter by a portfolio comprised of 60% stocks and 40% bonds. Meanwhile, small plans outperformed large plans across all types during the quarter, as well as over the fiscal year for most plan types, due to greater US equity exposure. Wilshire TUCs said allocation trends show that large foundations and endowments continue to be heavily weighted in alternatives, with a median allocation of 54.12% during the quarter.

Plans with assets above $1 billion overall rose 8.85% for the quarter and 3.78% for the fiscal year, while plans with assets under $1 billion outperformed large plans for the quarter, but not the fiscal year, with 12.04% and 3.27% gains respectively. For the fiscal year, all plan types except large corporate plans underperformed the 60/40 portfolio return of 5.29%.

US equities, as tracked by the Wilshire 5000 Total Market Index, increased 21.94% during the quarter and 6.78% for the fiscal year, while international equities, as measured by the MSCI AC World ex U.S., climbed 16.12% during the quarter, but fell 4.8% for the year. US bonds, represented by the Wilshire Bond Index, rose 4.54% during the quarter and 7.63% for the fiscal year.

“While most asset classes delivered positive returns during the second quarter, sizable allocations to US equities was the primary driver of returns,” Jason Schwarz, Wilshire Associates’ chief operating officer, said in statement. “Large plans underperformed small plans, likely due to their larger allocation to alternative investments, which should be expected to participate to a lesser degree in rapidly rising equity markets.”

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