Retirement Plans Still Struggling to Find Performance

Institutional assets tracked by the Wilshire Trust Universe Comparison Service (Wilshire TUCS) saw a median return of 1.13% for the first quarter, which led to a median trailing annual loss of -1.17%.

Wilshire TUCS is a cooperative effort between Wilshire Analytics, the investment technology unit of Wilshire Associates Incorporated, and a group of custodial organizations serving a wide variety of U.S. institutional investors.

Looking at data collected by the firms over the first five months of 2016, Wilshire TUCS shows the main exception to poor performance for first quarter was the U.S. real estate asset class, “due to a strong March, with the Wilshire US RESISM gaining 10.43% for March and 5.30% for the quarter.” Other assets classes used much more commonly in retirement plans and by other institutional investors lagged far behind. The Wilshire 5000 Total Market Index, for example, was up only 1.17% for the quarter, versus the MSCI EAFA or international developed market equity’s -3.01% loss for the quarter.

Robert Waid, managing director, Wilshire Associates, observes that bonds were stronger in the quarter, as the Barclays U.S. Aggregate gained 3.03%. This translates to a small range of plan returns with a low of 0% for large foundations and endowments with assets greater than $500 million and a high of 2.32% for large corporate funds with assets greater than $1 billion for the quarter.

“The spread for one-year returns was also small with a low of -2.20% for foundations and endowments and a high of 0.11% for Taft-Hartley health and welfare funds,” Waid adds. “Though all plan-type categories had positive median returns, a median return of 1.13% for all plans this quarter lags any annualized target and kept all plan-type categories negative for the year except Taft-Hartley Health and welfare funds.”

NEXT: Other highlights from the data 

According to Wilshire, this was the third quarter in a row where the 60/40 portfolio beat the median plan return, with a return of 1.91%. “Only large Corporate Plans beat the 60/40 portfolio in the first quarter,” Waid notes.

The backward-looking data from Wilshire also shows the differences in investment philosophies among different types of instructional investors. Corporate defined contribution plans, for example, tend to stick pretty close to the traditional 60/40 portfolio of bonds and equities, with the U.S. to international equity ratio standing at about 3:1.

Public plans, on the other hand, tend to carry about 10% more equity than their corporate counterparts, with more of the equity allocation going to U.S.-domiciled investments. Other differences emerged when filtering the data into groups of large and small plans, with larger plans of all types being likelier than their smaller counterparts to be using significant allocations to alternatives.

 Additional information and research is at www.wilshire.com.