(August 6, 2012) – The more bonds, the better for institutional plans’ one- and three-year returns, according to new data released by Wilshire Associates.
Short and medium-term returns for foundations and endowments, public pensions, and corporate pensions directly tracked plan types’ allocation to U.S. fixed-income. Corporate funds posted the best average performance, at 3.68% (one year) and 12.53% (three years), with 34.82% of assets sunk into domestic bonds. Public funds returned 1.15% (one year) 11.66% (three years), with 25.45% of assets in US fixed income. Of the three institutional categories, foundations and endowments made the smallest one- and three-year returns, at 0.37% and 10.95%, respectively. Plans in this group allocated a median of 22.08% of assets to domestic bonds. None of the three plan types had any significant investment in foreign fixed-income.
Falling equity markets, particularly internationally, proved a drag on all three institutional sectors’ short-term returns. Foundations and endowments, the worst performing group, has a median of 15.33% allocation to foreign equities. Corporate funds, in contrast, have only 10.38% exposure to the volatile overseas markets. Public funds, the middle performer, splits the difference with 13.20% invested. Equity markets, foreign and domestic, have been hard on almost all asset owners over the last months, according to Wilshire.
“After the best quarter in one-and-one-half years, the median quarterly return for all plan types was down -1.58% in the second quarter,” said Robert J. Waid, a Wilshire managing director, in a statement. “Taft Harley Defined Benefit plans were off the most with a -1.98% median return while Taft Harley Health and Welfare Funds doing the best with a median return of -0.70%.”
Wilshire’s analysis took a total of 655 plans’ performance and allocations into account, representing nearly $2.85 trillion among the three institutional categories.