Northern Trust Universe Data

Solid Gains for Institutional Plan Sponsors in Third Quarter of 2020

Institutional investment plans maintained positive returns in the third quarter of 2020 as global equity and bond markets posted strong gains, according to the Northern Trust Universe. Plan sponsors saw a median plan return of 5.1% from July 1 to September 30, 2020.

The Northern Trust Universe tracks the performance of 388 large U.S. institutional investment plans, with a combined asset value of more than $1.3 trillion, which subscribe to performance measurement services as part of Northern Trust's asset servicing offerings.

Plans in the Foundations and Endowments segment produced a 5.9% median return in the third quarter, outpacing Public Funds, with a median return of 5.0% for the quarter, and Corporate ERISA pension plans, which returned 4.4% at the median.

“U.S. markets continued to show signs of an economic recovery, mostly as a result of loose monetary policy by the Federal Reserve,” said Mark Bovier, regional head of Investment Risk and Analytical Services at Northern Trust. “Equity indices posted strong returns, particularly in August. While bond markets were relatively flat overall for the quarter, high-yield bonds performed well as investors showed a willingness to take on more risk.”

U.S. equity is a core allocation for most plans in the Northern Trust Universe, and the Northern Trust U.S. equity program universe reported a median gain of 8.3% in the third quarter. Another top allocation for most plans, U.S. fixed income, had a median return of 1.4% for the quarter.

Corporate ERISA pensions have the largest allocations to U.S. fixed income, with 38.8% of plan assets allocated to the asset class for the median ERISA plan at the end of the third quarter – a 2% increase from the prior quarter, resulting from investors reallocating assets from the U.S. equity asset class. The U.S. equity median allocation fell to 26.0% of the median ERISA plan assets, down 9% from five years ago. International equity median exposure was 7.5% in the third quarter.

Public Fund plans have the highest allocations to equity, with the median U.S. equity allocation at 30.4% at the end of the third quarter. International equity median exposure came to 15.8%. The median exposure to U.S. fixed income for Public Funds declined to 23.7% from the second quarter. Relative to other alternatives, private equity has the largest median allocation for Public Funds, with a 7.7% median allocation.