Northern Trust: US Institutional Plan Sponsors Achieve Positive Q2 Returns

(August 1, 2011) — Institutional investors in the United States had their fourth consecutive quarter of positive returns in the second quarter of 2011, research by Northern Trust shows.

“The gains keep coming for US plan sponsors, and while results were modest for the quarter, the median plan had strong double-digit returns over the past year,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services, in a statement. “Many public funds gained more than 20% in the 12 months ending June 30, the end of the fiscal year for those public employee pension plans.”

According to the firm, members of the Northern Trust Universe recorded gains of 1.2% at the median. Meanwhile, corporate schemes had a median return of 1.4% in the second quarter. Public funds returned 1.3% and foundations & endowments gained 1.1% at the median. Looking at 12-month returns, public funds led the way, gaining 22.2% at the median. The median one-year return was 20.8% for corporate pensions and 20.3% for foundations & endowments.

In April, the Northern Trust Universe — which represents the performance of about 300 large institutional investment plans with a combined asset value of about $839.2 billion — found that strong equity performance coupled with the success of active managers contributed to its success. “What we’ve seen in our universe is that a lot of our plan sponsors have been overweight in small to mid-cap stocks, which have done particularly well,” Frieske told aiCIO following the release of the report. “The strong performance of active managers has helped that gain,” he added.

According to Frieske, the superior performance of active over passive managers contrasts with assertions by prominent figures in the investment industry, such as Vanguard. “We’ve proven period over period that active managers are a good idea, as our universe has demonstrated that the median manager — the guy in the middle of the pack — is better than the index,” he said.