Corporate ERISA Plan Returns Beat Out Other Institutional Investors Over 2Q and Last 5 Years

Institutional investors aren’t racing each other; even still, it’s interesting to see how they stack up against one another.

Corporate ERISA plans posted a higher median return in the second quarter of 2016 than any other plan type, according to Northern Trust data; public pensions came in second, with endowments trailing.

The ranking holds when the timeline is expanded to the last 5 years.

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In the second quarter of 2016, the corporate Employee Retirement Income Security Act (ERISA) plans category fared best among all plan types with a median return of 3%, Northern Trust finds. Public funds were close behind with 1.7% in gains, while foundations/endowments netted 1.5% in the second quarter.

“Differing returns across plan types were driven largely by the duration of their fixed-income investments,” explains Bill Frieske, senior investment performance consultant, Northern Trust Investment Risk and Analytical Services. “In an effort to de-risk their defined benefit pension plans, corporate ERISA plan sponsors have been lengthening the duration of their fixed-income programs. Interest rates declined in the second quarter, which increased returns for long duration bonds and helped boost corporate ERISA plan returns.”

[…]

For public funds, returns were dampened by a larger allocation to international equities (15% at the median), which produced the lowest median return of the major asset classes. For foundations and endowments, returns were muted by weak performance from a significant 11% allocation to private equity, “the second lowest returning major asset class at 0.2%.”

Long-term data reported with the quarterly results shows corporate ERISA plans have enjoyed 5-year trailing returns of 7.5%, while public funds earned 6.9% and foundations/endowments netted 5.7%.

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