Market Digest

Northern Trust announced today that most U.S. institutional investment plan sponsors reported a fourth consecutive quarter of negative results for the period ending September 30, 2008, according to data in the Northern Trust Universe. The Northern Trust Universe represents more than 300 institutional investment plans, with a combined asset value of approximately $660 billion, which subscribe to Northern Trust performance measurement services.

“All plan types suffered significantly from volatile and declining markets in the third quarter, with Corporate plans performing especially poorly relative to their assigned benchmarks,” said William Frieske, performance consultant, Northern Trust Investment Risk & Analytical Services.

Corporate plans posted a median return of -8.8% for the third quarter while Public Fund and Foundation & Endowment plans reported median returns of -9.0% and -8.5%, respectively, for the quarter. Corporate pension plans had the lowest one-year performance of all three segments, with a median return of -15.5%, compared to -14.8% for Public Funds and -13.2% for Foundation & Endowment plans.

“In addition to extreme market volatility, plans in all segments were hampered by the underperformance of fixed income programs,” Frieske said. “The median return for Total Fixed Income Programs in the Northern Trust Universe was -2.8% in the third quarter, compared to a -0.5% return for the Lehman Aggregate Bond Index. Two primary factors — duration and credit exposure — were responsible for fixed income program underperformance relative to the bond market index. As a result, Corporate pension plans lagged their assigned performance benchmarks by the widest margin in at least a decade.”

Four consecutive quarters of negative performance has weighed heavily on longer-term numbers. Three- and five-year returns remain positive, however:

                                3-Year            5-Year
  Corporate pension plans       2.5%              6.9%
  Public Funds                  2.6%              6.8%
  Foundations & Endowments      2.8%              7.1%

As a part of its client focus philosophy, Northern Trust has provided risk and performance services for over three decades. Northern Trust’s Investment Risk & Analytical Services capabilities include risk monitoring and measurement, performance evaluation and other specialty services, with continuing investment in research and client-focused product development.

Source: Northern Trust