ERISA plans lead modest institutional growth in 1QNews added by Benefits Pro on June 2, 2014

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By Nick Thornton

Corporate-sponsored retirement plans returned a modest 2.8 percent in the first quarter of 2014, slightly outpacing returns in public funds (1.9 percent) and in foundations and endowments (1.6 percent).

That’s according to Northern Trust Universe data, which tracks the performance of about 300 large institutional investment plans with combined assets of $899 billion.

Domestic equity and fixed-income markets paced the gains, as returns on international securities were even more modest.

All asset classes had positive returns, but at a decidedly slower rate than the preceding quarter. It was the third consecutive quarter of gains for corporate plans, while public funds and foundations and endowments each returned gains for the seventh straight quarter.

The best performing asset class in the Northern Trust Universe was private equity, returning 4.2 percent. Real estate returned 2.8 percent, U.S. fixed income 2.2 percent, while the largest asset class, U.S. equity, returned 1.6 percent.

Corporate ERISA plans’ largest allocation was in U.S. fixed income (36.8 percent). Public funds held 32.7 percent in U.S. stocks, and foundations and endowments held 23.3 percent in private equity.

Last quarter’s leading performance by private equity and real estate will likely stoke the debate over the place of alternatives in the retirement plans of working Americans.

As quantitative easing is rolled back, some market watchers say equity markets will have to grow more dependent on fundamentals, like balance sheet growth, improving employment and consumer demand. Continued relative stagnation in equity performance could entice institutional investors into riskier and costlier alternatives.

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