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US institutional plan sponsors gained 12.3 per cent in 2012

Institutional plan sponsors reaped a fourth consecutive year of positive investment returns in 2012, with equity markets contributing a large portion to the 12.3 per cent gain for the median plan in the Northern Trust Universe.

Corporate pension plans and public funds, with higher allocations to public equities, had stronger returns than the foundations and endowments segment in the 12 months ending 31 December, 2012.

The Northern Trust Universe tracks the performance of about 300 large US institutional investment plans, with a combined asset value of approximately USD760bn, which subscribe to Northern Trust performance measurement services.

“With the double-digit gains of 2012, the median plan in the Northern Trust Universe has not had a down year since the 25 per cent drop in 2008,” says William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services. “Rising, if volatile, stock markets have driven much of the positive performance since that historic financial collapse. As a result, the median sponsor now has a three-year return of just over 8.4 per cent.”

Public equities were again key to performance in 2012, with programmes in the Northern Trust Universe returning 16.9 per cent at the median for the year. International equity programmes gained 18.2 per cent at the median, while the median US equity programme gained 16 per cent. The median private equity programme, meanwhile, had a 10 per cent return for the year, and total fixed income programs gained 8.8 per cent at the median.

Corporate pension plans had the highest returns in the Northern Trust Universe, gaining 13.6 per cent at the median in 2012. Public funds – pension plans for public employees – gained 12.9 per cent and the foundations and endowments segment – funds managed for philanthropic organisations, colleges and universities – rose 11.5 per cent for the year. In the fourth quarter, public funds led with 2.1 per cent, corporate plans gained 1.86 per cent and F&E plans returned 1.81 per cent at the median, according to Northern Trust Universe data.

“Corporate plans benefited from their higher allocations to public equities – 47 per cent at the median – and just an 11 per cent allocation to PE and hedge funds,” Frieske says. “Conversely, F&E plans had 40 per cent allocated to PE and hedge funds and 32 per cent allocated to equities, at the median, and as a result lagged the pension segment by 200 basis points for the year.”

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