Institutional plan sponsors in the United States saw significant investment gains during the second quarter of 2020, with a median plan return of 10.6% as markets rebounded from a massive sell-off in equities at the start of the Covid-19 pandemic in the first quarter of the year, Northern Trust said in a statement.

Public funds had a median return of 11.14% in the second quarter, outpacing other institutional segments tracked by the Chicago, Illinois-based financial services group.  Corporate ERISA pension plans returned 10.55% at the median while foundations and endowments produced a 9.24% median return in the three months to June 30. (The Employee Retirement Income Security Act of 1974, or ERISA, is a US federal law that sets standards for voluntarily established retirement and health plans in the private sector.)

“Investors’ willingness to take on additional risk propelled returns in the equity and corporate fixed income sectors, bringing those markets close to their all-time highs by the end of the second quarter,” says Mark Bovier, regional head of investment risk and analytical services at Northern Trust. “Institutional plans with higher allocations to those sectors benefited from the risk exposure, while alternative asset classes trailed in relative performance during the quarter.”

US equity is a core holding for most plans in the Northern Trust universe, which tracks the performance of more than 320 large US institutional investment plans, with a combined asset value of more than US$1 trillion. The Northern Trust US equity programme universe reported a 22.0% median gain in the second quarter, the highest quarterly return posted this century. Another top holding for most plans, US fixed income, had a median return of 4.7% for the quarter, with corporate and high yield bonds gaining 10% or more for the period.

Corporate ERISA pensions have the largest allocations to US fixed income, with 36.9% of plan assets allocated to the asset class for the median ERISA plan at the end of the second quarter. The US equity allocation was 28.2% of the median ERISA plan assets. The allocation to US equity increased 4.6% from the prior quarter as a result of strong returns in the asset class. US equity exposure has dropped from a median allocation of nearly 33% five years earlier. International equity median exposure was 9% in the second quarter.

Public fund plans have the highest allocations to equity, with the median US equity allocation at 34.2% at the end of the second quarter. International equity median exposure came to 15.5%. The median exposure to US fixed income for public funds was 24.7%.

Foundation and endowment plans had a median US equity allocation of 28.6% in the second quarter. International equity median exposure was 9.5% and the median exposure to US fixed income was 10.9%. Alternative assets are widely used in the foundation and endowment universe, with private equity and hedge fund median allocations at 15.1% and 11.6%, respectively, at the end of the quarter.

Despite a strong second quarter, longer-term returns for all three institutional segments were constrained by the earlier market disruption, Northern Trust says. With June 30 marking the end of the fiscal year for many Public Funds and university endowments, one-year median returns for those segments hovered in the low single digits.

Public fund plans witnessed a 3.8% total plan loss year to date and a 1.9% one-year return at the median. Equities specifically saw a 7.4% YTD loss and a 0.6% gain over one year in the segment. Fixed income investment plans for Public Funds saw a 3.2% YTD return and a 6.1% one-year return. Foundation and endowments had a 3.6% total plan loss YTD and 2% one-year return. Equities were down 6.9% YTD for the segment, with a 1.1% gain over one year. Fixed income plans saw a 2.6% YTD return and a 4.4% one-year return in the segment.