Public pension plans lost a median 13.18% during the first quarter of the year, according to the Wilshire Trust Universe Comparison Service (TUCS), which said it was the worst quarterly performance in the 40 years it has been tracking public pension plan data.
Plans with more than $1 billion in assets returned 10.82% during the quarter, which was the worst performance during a quarter since the fourth quarter of 2008.
Wilshire TUCS also reported that institutional assets posted an all-plan median loss of 11.87% for the quarter—which was also the worst quarter in 40 years for institutional assets—and a loss of 3.67% for the year ending March 31.
“The performance of US institutional plan assets was negatively impacted by both equity and fixed-income exposures,” Wilshire Associates Chief Operating Officer (COO) Jason Schwarz said in a release. “Credit markets have deteriorated due to the abrupt shutdown of the global economy, and many investor portfolios had more credit risk than what is indicated by the performance of broad fixed-income benchmarks.”
Schwarz also said that many alternative investments, which are typically used to provide diversification to traditional assets, struggled because of exposure to various segments of credit markets. And it didn’t help large foundations and endowments that they had significant exposure to alternatives, with a median fourth quarter 2019 allocation of 53.08%.
Earlier this month, Wilshire reported that funding levels for sate pension plans fell to their lowest levels in 30 years.
US equities represented by the Wilshire 5000 Total Market Index fell 20.70% during the first quarter and were down 8.94% for the 12 months ending March 31, while international equities, as tracked by the MSCI All Country World Index US, tumbled 23.36% during the first quarter and 15.57% for the year ending March 31. At the same time, US bonds, as represented by the Wilshire Bond Index, rose 0.93% during the quarter and 8.17% for the 12 months to the end of March.
Median quarterly returns across all plan types ranged from losses of 6.24% for large corporate funds with assets of more than $1 billion to losses of 13.75% for foundations and endowments. Foundations and endowments were down 5.6% for the 12 months ending March 31, while large corporate plans were the only segment to earn positive returns for the 12-month period, gaining 3.51%.
Despite the dismal quarter, all large plan types outperformed a portfolio of 60% stocks and 40% bonds, which fell 12.05% during the first quarter of the year. Large plans also outperformed small ones across all plan types during the quarter and the year, which Wilshire TUCS attributed to greater non-US equity exposure.
All plans with assets of more than $1 billion overall registered median losses of 9.50% and 1.37% for the quarter and year ending March 31, respectively, while plans with assets of less than $1 billion lost 12.68% for the quarter and 4.82% for the year.