Pensions, Endowments Beat By Stock Market In Fiscal 2019

Public pension funds, university endowments and nonprofits saw returns that trailed the broader stock and bond markets this year after moving more into alternative investments.

Data released Tuesday by the Wilshire Trust Universe Comparison Service showed public pension plans with more than $1 billion in assets earned a median return of 6.79% for the year ended June 30.

Large foundations and endowments with more than $500 million invested earned median returns of 5.4%. Both were below the return on U.S. stocks and bonds, both of which returned more than 9%, according to Wilshire Trust.

The return for foundations and endowments was the lowest since 2015, according to a Tuesday Bloomberg News Service report based on the Wilshire data.

The return for public pension plans was the lowest since 2016, and below what plans were counting on, according to another report on the data in The Wall Street Journal, which said public plans project a long-term return of 7.25%.

Riskier Portfolios

In both cases, a shift in investing philosophy has cost the plans.

WSJ: America’s Pension Funds Fell Short in 2019 https://t.co/hDuyOpkeMb #WilshireTUCS #WilshireConsulting #pension #Investment

— Wilshire Associates (@WilshireAssoc) August 6, 2019

The long bull market boosted pensions with years of double-digit returns, but they’ve still failed to keep up with what would be needed to pay promised benefits because of longer lifespans, lower payments into the funds and value lost in the recession.

In recent years, they’ve moved into more riskier investments, such as real estate, trying to make up the shortfall, the Journal said. 

Bloomberg reported the same has occurred with college endowment funds, which have turned to riskier private equity and hedge funds in an attempt to boost returns. Among the largest endowments, allocations to alternative investments average more than 40%, according to Wilshire.

Endowments and pensions would have been better off with traditional equities and bonds.

U.S. stocks tracked in the Wilshire 5000 Total Market Index rose 9.09%, the firm said, while U.S. bonds rose 9.19%.  

All institutional plans tracked by Wilshire Trust posted median returns of 6.47% for the year.

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