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Northern Trust Universe Data: Solid Gains for Institutional Plans in Q1 as Global Equity Markets Surge
Rhea-AI Impact
(Low)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary
In the first quarter of 2024, global equity markets saw significant gains as investors bet on a 'soft landing' and upcoming interest rate cuts. The Northern Trust Universe reported solid returns for institutional asset owners, with a 3.7% median return for plans over $100 million. The Northern Trust Foundation and Endowment (F&E) universe had a 3.9% return, while the Public Funds universe saw a 3.5% return and the Corporate (ERISA) universe had a 1.2% return. Large cap stocks outperformed small caps, with the US Equity Program universe returning 9.6%. However, the US Fixed Income program saw a -0.2% return due to rising bond yields. Foundations & Endowments had impressive one-, three-, and five-year returns at 12.3%, 5.0%, and 8.6%, with a median private equity allocation at 22.9%. Public Funds also showed strong returns, while the ERISA plan universe lagged behind with a 1.2% return and large US Fixed Income allocation.
Positive
Global equity markets saw record levels, signaling investor confidence.
The Northern Trust Universe reported solid gains for institutional asset owners.
Large cap stocks outperformed small cap stocks in the US Equity Program universe.
Foundations & Endowments showed impressive one-, three-, and five-year returns.
Public Funds universe had strong returns across different time periods.
Negative
The US Fixed Income program saw a negative return due to rising bond yields.
ERISA plan universe had underperformance compared to other client segments.
ERISA clients had small allocations to alternative assets, impacting returns.
Insights
The reported median return of 3.7% for institutional asset owners reflects a positive trend in the global equity markets, likely linked to investor optimism around economic softening and anticipated interest rate cuts. The differentiation in returns between the Northern Trust Universe segments—particularly the stronger performance of Foundations & Endowments and Public Funds compared to ERISA plans—is indicative of the impact asset allocation strategies have on investment outcomes. Large cap equity's outperformance over small cap, as demonstrated by the Russell indexes, suggests a market leaning towards more established, possibly less volatile entities during this period. Moreover, the negative turn in fixed income returns is a reminder of the inverse relationship between bond prices and yields, which may signal investor sentiment about increasing caution around rate movements. The allocations shift away from private equity in favor of equities should be noted as a potential rebalancing in response to equity performance.
Analyzing the asset allocation trends among institutional investors is revealing of market sentiment. The strong median return in equities could suggest that market participants are expecting economic improvement, prompting a shift towards risk assets. The decline in median return for fixed income, together with the rise in yields, could indicate a market adjustment in anticipation of interest rate changes. It is also worth noting that the lower median return for ERISA plans may reflect the conservative stance typically associated with these plans, being heavily allocated towards fixed income. The information provided suggests a strategic move by institutions to recalibrate their portfolios toward sectors showing relative strength, which is a common practice in response to changing market dynamics.
CHICAGO--(BUSINESS WIRE)--
Global equity markets rallied to record levels during the first quarter of 2024, on expectations of a "soft landing" and interest rate cuts later in the year. The median return for institutional asset owners included in the Northern Trust All Funds Over $100 million plan universe was 3.7% for the quarter ending March 31, 2024.
The Northern Trust Universe tracks the performance of 405 large U.S. institutional investment plans, with a combined asset value of more than $1.4 trillion, which subscribe to performance measurement services as part of Northern Trust's asset servicing offerings.
The Northern Trust Foundation and Endowment (F&E) universe produced a 3.9% median return while the Northern Trust Public Funds universe median return was up 3.5% and the Northern Trust Corporate (ERISA) universe median return was up 1.2% for the quarter.
"The year started strong as global equity markets surged to new highs, showing investors were willing to take on added risk during the quarter,” said John Turney, Global Head of Total Portfolio Solutions. “Gains from equities were partially offset in most institutional portfolios by allocations to fixed income, where rising yields led to negative returns and indicated caution about the future direction of interest rates.”
The Northern Trust U.S. Equity Program universe produced a 9.6% median return for the first quarter. Large cap stocks outperformed small cap stocks, with the Russell 2000 small cap index returning 5.2%, compared to the Russell 1000 large cap index which returned 10.3% for the period.
The Northern Trust U.S. Fixed Income program universe median return was down -0.2% for the quarter. The US Ten-Year Government Bond yield rose from 3.88% to 4.21% during the quarter and the two-year government bond yield rose 78 basis points to 4.59%.
Foundations & Endowments universe median one-, three- and five-year returns were 12.3%, 5.0% and 8.6%, respectively. The median allocation to private equity was 22.9%, a slight decline from the prior quarter, resulting from strong returns in the equity asset class. The median allocation to hedge funds was 9.0%.
Public Funds universe median returns for the one-, three- and five-year periods stood at 10.4%, 4.6% and 7.5%, respectively. The median allocation to U.S. and international equity were 27.6% and 12.7%, respectively, while the median exposure to U.S. fixed income held steady at 22.2% while strong performance in equities lowered the segment’s median private equity allocation to 11.5%.
ERISA plan universe median one-, three- and five-years returns were 6.3%, -0.1% and 4.7%, respectively. The segment’s large median allocation to the US fixed Income asset class (56.2%) resulted in underperformance relative to other client segments. ERISA clients continue to have small allocations to alternative assets, where the median allocation to private equity is 2.7%.
Results as of March 31, 2024:
1st Qtr
1Yr
3Yr
5Yr
ERISA
1.2%
6.3%
-0.1%
4.7%
Public Funds
3.5%
10.4%
4.6%
7.5%
Foundations & Endowments
3.9%
12.3%
5.0%
8.6%
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 24 U.S. states and Washington, D.C., and across 22 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2024, Northern Trust had assets under custody/administration of US$16.5 trillion, and assets under management of US$1.5 trillion. For more than 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit us on northerntrust.com. Follow us on X (formerly Twitter) @NorthernTrust or Northern Trust Corporation on LinkedIn.
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 https://www.northerntrust.com/terms-and-conditions.
