Northern Trust Universe Data: Lower Interest Rates Paved the Way for a Strong Rally in Q4
February 07 2024 - 9:15AM
Business Wire
Cooling inflation, softening labor markets and lower interest
rates during the fourth quarter paved the way for a strong rally in
financial markets to end 2023. The median return for institutional
asset owners included in the Northern Trust All Funds Over $100
million plan universe was 7.3% for the quarter ending December 31,
2023. The median 12-month return for the universe was 11.3%.
The Northern Trust Universe tracks the performance of 406 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 Corporate (ERISA) universe median return for
the quarter was 9.5% while the Northern Trust Public Funds universe
median return was 6.4%, and the Northern Trust Foundation and
Endowment (F&E) universe produced a 5.5% median return.
“The final quarter of 2023 saw markets rally as a result of the
reduction in the pace of inflation and increased hopes that the
U.S. market will be able to avoid a recession,” said Amy Garrigues,
global head of Investment Risk and Analytical Services at Northern
Trust. “Though market volatility posed many challenges for
investors during the year, we saw this shift in the fourth quarter
and ended on a positive note.” The Northern Trust U.S. Equity
Program universe generated an 8.5% median return for the fourth
quarter, following guidance from the Federal Reserve that interest
rate cuts may come sooner than previously anticipated. Small cap
stocks outperformed large cap stocks, with the Russell 1000 large
cap index returning 12.0%, compared to the Russell 2000 small cap
index which returned 14.0% for the period.
The Northern Trust U.S. Fixed Income program universe median
return was 5.3% for the quarter. The U.S. ten-year government bond
yield fell from 4.59% to 3.88% during the quarter and the two-year
government bond yield fell 78 basis points to 4.25%.
ERISA plan universe median one-, three- and five-years returns
were 10.3%, -1.0% and 6.1%, respectively. The U.S. fixed income
asset class remains the largest ERISA plans allocation with a
median allocation of 53.1%, enabling the client segments to
outperform the other segments as a result of rising bond prices
during the quarter. The segment continues to have small allocations
to alternative assets, where the median allocation to private
equity is 2.3% and the median allocation to hedge funds is 0%.
Public Funds universe median returns for the one-, three- and
five-year periods stood at 10.6%, 4.6% and 8.3%, respectively. The
median quarter allocation to U.S. and international equity are
28.1% and 12.6%, respectively, while the median exposure to U.S.
fixed income is 22.2%. The segment continues to increase
allocations to private equity, where the median allocation now
stands at 14.0%.
The F&E universe median one-, three- and five-years returns
were 11.3%, 5.2% and 9.1%, respectively. The F&E universe
Foundation and Endowment is continuing the trend to allocate funds
to the private equity asset class. The median allocation to private
equity now stands at 24.1%, a slight decline from the prior
quarter, resulting from strong returns in the U.S. fixed income
segment where the median allocation to bonds grew from 8.3% to
8.7%.
Results as of December 31, 2023:
4th
Qtr
1Yr
3Yr
5Yr
ERISA
9.5%
10.3%
-1.0%
6.1%
Public Funds
6.4%
10.6%
4.6%
8.3%
Foundations & Endowments
5.5%
11.3%
5.2%
9.1%
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 December 31, 2023, Northern Trust had assets under
custody/administration of US$15.4 trillion, and assets under
management of US$1.4 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20240207982307/en/
Europe, Middle East, Africa & Asia-Pacific: Camilla Greene
+44 (0) 20 7982 2176 Camilla_Greene@ntrs.com
Simon Ansell + 44 (0) 20 7982 1016 Simon_Ansell@ntrs.com
US & Canada: John O’Connell +1 312 444 2388
John_O’Connell@ntrs.com
http://www.northerntrust.com
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