Wilshire: Institutional Assets Suffer in 3Q, With Foundations & Endowments Hit Hardest

(November 8, 2011) — Performance of institutional assets was negative for the third quarter, according to a report by the Wilshire Trust Universe Comparison Service.

Wilshire TUCS includes about 900 plans with $2.92 trillion in assets.

“In a quarter where equity exposure pulled down total plan returns, Taft-Hartley health and welfare funds were rewarded for the large exposure to debt with a median allocation to bonds of 75.66% which easily outpaced the next largest median bond allocation segment of 36.71% for corporate funds,” said Robert J. Waid, Managing Director, Wilshire Analytics, in a statement. “The overall results across Wilshire TUCS are not surprising given the fact that battered by worries over a worldwide economic slowdown, a headline-grabbing downgrade of United States Treasury debt and the ongoing European debt crisis, the global stock markets took a tumble during the third quarter of 2011 with the Wilshire Global Total Market IndexSM falling -20.66%. Here in the US, the stock market fell in all three months of the third quarter, with the Wilshire 5000 Total Market IndexSM returning -15.04% for the three month period.”

According to Wilshire, foundations and endowments had the highest median allocation to equities, at 52.84%. Allocations by foundations and endowments to domestic equities were a median 33.55% and international equities, a median 16.06%.

In contrast, earlier this week, preliminary data released by the Commonfund Institute and the National Association of College and University Business Officers (NACUBO) revealed positive news for foundations and endowments, showing that for the 2011 fiscal year (July 1, 2010 to June 30, 2011), institutions’ endowments in the United States returned an average of 19.8%. The analysis revealed that while average returns were quite similar across size groups, the way they were earned varied widely. Institutions with assets over $1 billion reported allocations to domestic equities that averaged just 12%. Meanwhile, at the opposite end of the size spectrum, endowments with assets below $25 million reported a 41% allocation. At the same time, the two largest size cohorts reported average fixed-income allocations of 10% or less, while the three smaller size cohorts all had average fixed-income allocations in excess of 20%.

With respect to alternatives, the research demonstrated that institutions with assets over $1 billion reported an average allocation of 58%, while institutions with assets under $25 million reported an average alternatives allocation of 9%. In general, allocations to international equities and short-term securities/cash/other were more consistent across the size cohorts.