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Hefty equity returns lead to strong gains for U.S. institutional investors in 2017

February 6, 2018
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Robust equity markets led U.S. institutional investment plans to strong gains in 2017 with a median return of 15.3 per cent for the year, according to new data by Northern Trust Corp.

The Northern Trust universe, which tracks about 300 large U.S. institutional investment plans, showed the median return for U.S. equity in the fourth quarter of 2017 was 6.1 per cent with non-U.S. equities following at 4.9 per cent. Fixed income posted more modest returns with a median of 0.7 per cent for the quarter.

In a news release, Mark Bovier, regional head of investment risk and analytical services at the firm, noted the fourth quarter of 2017 marked the ninth consecutive three-month period of gains for plans, with equities providing the foundation for positive results over that period. “All plan sponsor segments had median returns above three per cent in the fourth quarter, but each segment took a different path to achieve those gains.”

Read: Is latest market volatility a sign of the correction investors have been waiting for?

In the last quarter of the year, public pension funds led the pack with a median return of 3.8 per cent, followed closely by private sector plans at 3.7 per cent and foundations and endowments at 3.4 per cent.

The larger allocation to equities boosted public plans, while private plans had the most significant exposure to fixed income. However, private plans invested heavily in longer-duration bonds and sectors that helped them gain better results than simply using core fixed income, the release noted.

“Institutional plan sponsors continued to benefit from a historic bull market in stocks in 2017,” said Bill Frieske, senior investment performance consultant in investment risk and analytical services at Northern Trust. “Previous highs for institutional returns in the Northern Trust universe were recorded following the severe stock market downturns of 2008, when the global financial crisis hit, and 2002, when the so-called tech bubble burst. In contrast, 2017 marked the continuation of a positive run for U.S. equities dating back to 2015.”

Read: Canadian DB plans post positive returns in last quarter of 2017

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