Institutional Investors Post Sixth Straight Quarter of Losses

A Northern Trust press release said Corporate plans posted a median return of -6.6% in the first quarter, while Public Funds were slightly better at -6.3%, and Foundation & Endowment plans posted a median return of -5.5%. The one-year return for Corporate plans was -27.1%, while Public Funds were down 26.9% and Foundations & Endowments were down 25.9%.

According to the announcement, the five-year numbers were down to near 0% returns, with three-year returns in negative territory

William Frieske, performance consultant, Northern Trust Investment Risk & Analytical Services, noted in the press release that Foundation & Endowment funds got a further boost from their relatively large allocation to hedge funds (see  Hedge Funds Down but not Out ). “The composite F&E allocation to hedge funds was about 8% in our Universe. That compared to a hedge fund allocation of about 2% for both Corporate plans and Public Funds,” he noted.

In the Northern Trust Universe, the Total Equity Program was down by 10% in the first quarter, compared to a loss of 22.2% in the last quarter of 2008. Overall hedge fund returns were about 1% for the quarter, compared to -11% for the S&P 500 Index, and -13.9% for the MSCI EAFE Index of large cap international stocks.

“On the positive side, active management proved to be successful for institutional investors in the first quarter,” Frieske said in the announcement. “The median Corporate ERISA plan outperformed its benchmark by 252 basis points in the first quarter of 2009, compared to 169 basis points of under-performance in the fourth quarter of 2008.”

The Northern Trust Universe represents more than 300 large institutional investment plans, with a combined asset value of approximately $530 billion, which subscribe to Northern Trust performance measurement services.