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Third Quarter Results Dip for Institutional Plan Sponsors

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Institutional plan sponsors lost almost 1 percent in the third quarter at the median, according to Northern Trust Universe data. Longer term performance remains strong, with 1-year returns for all plan types averaging 10 percent or greater.

The Northern Trust Universe tracks the performance of about 300 large U.S. institutional investment plans, with a combined asset value of approximately $899 billion, which subscribe to performance measurement services as part of Northern Trust’s asset servicing offerings.

Institutional plans within the Northern Trust Universe suffered a 0.8 percent quarterly loss due to negative returns in most investment sectors. Corporate ERISA plans had the best relative performance among all plan types with a return of -0.7 percent. Foundations & Endowments had the second best relative performance of the quarter with a return of -0.9 percent. Public Funds showed a net loss of 1.3 percent. All plan types were down from the second quarter median gain of nearly 4 percent. Corporate ERISA plans recorded their first quarterly loss after gaining for four straight quarters. Both Public Funds and Foundations & Endowments suffered their first quarterly losses after generating positive returns for eight consecutive quarters.

Historically the third quarter has been the worst performing quarter on record, with the average third quarter return over the last 15 years coming in at -0.1 percent. It is the only quarter in the Northern Trust Universe to average a negative return.

Despite the median loss for all plans, institutional plan sponsors have still not experienced two consecutive quarters of negative median returns since the fourth quarter of 2008 and the first quarter of 2009.

“During the third quarter risk assets seemed to be out of favor as small-cap U.S. and international stocks, emerging market debt and high yield debt lagged,” said Bill Frieske, senior performance consultant, Northern Trust Investment Risk and Analytical Services. “Overall, market volatility, Federal Reserve tapering and weak international growth contributed to the first loss for many sponsors in several quarters.”

Asset allocation per segment was as follows:

  • Corporate ERISA plans were weighted towards U.S. fixed income (38.4 percent) and U.S. equity (28 percent)
  • Foundations & Endowments were weighted towards private equity (24.4 percent) and U.S. equity (19.4 percent)
  • Public Funds were weighted towards U.S. equity (32.8 percent) and international equity (23.9 percent)

The smaller loss for corporate ERISA plans was in part due to a large allocation to U.S. fixed income, which returned 0.15 percent at the median. The performance of Foundations & Endowments reflected their heavier weighting towards U.S. equities, which experienced a modest decline of -0.8 percent. Public Funds were impacted by a 23.9 percent allocation to international equity markets, which performed poorly and led to a bigger loss in the quarter.

Third quarter Northern Trust Universe results showed that weak returns from the riskiest sectors of the market hurt overall plan sponsor results. Small-cap stock, both U.S. and international, lost nearly 8 percent. Emerging market equity and emerging market debt both lost over 3 percent. High yield bonds lost almost 2 percent.

International stock returns were negative across the board. All segments, including developed or emerging markets, large- or small-cap, all lost between 5 and 6 percent.

Equity performance was largely dependent upon capitalization; returns got materially worse moving from large-cap to small-cap stocks. Large-cap managers had a median return of 0.2 percent while the median return for mid-cap managers was -3.3 percent and the median small-cap manager lost almost 7 percent. Growth performed better than value across the range.

Longer-term returns as of September 30, 2014 were:

3rd Qtr

1 Yr 3 Yr 5 Yr
ERISA -0.7% 11.1% 12.9% 10.6%
Public Funds -1.3% 10.8% 13.3% 10.5%
Foundations & Endowments -0.9% 10.0% 12.4% 9.4%

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of asset servicing, fund administration, asset management, fiduciary, and banking solutions for corporations, institutions, families, and individuals worldwide. Chicago-based Northern Trust has offices in 19 states, Washington, D.C., and 20 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2014, Northern Trust had assets under custody of US$5.9 trillion, and assets under investment management of US$923.3 billion. For 125 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit and follow us on Twitter @NorthernTrust.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at

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