Northern Trust Universe Data: Returns Stumbled in Q3 Under Stress from Inflation and Continued Interest Rate Hikes

Global markets ended the third quarter of 2022 in negative territory after central banks reaffirmed their commitment to fight inflation by raising interest rates. As markets continued to sell off, the median return for institutional asset owners included in the Northern Trust All Funds Over $100 million plan universe was -4.2% for the quarter ending September 30, 2022.

The Northern Trust Universe tracks the performance of 373 large U.S. institutional investment plans, with a combined asset value of more than $1.13 trillion, who subscribe to performance measurement services as part of Northern Trust's asset servicing offerings.

“Institutional investors saw a third consecutive quarter of negative returns, at the median, as markets struggled after rallying in the first half of the third quarter,” said Amy Garrigues, global head of Investment Risk and Analytical Services at Northern Trust. “Many key economic indicators are now projecting the growing likelihood of a recession and inflation still weighs heavily on equity markets in the U.S. and Europe.”

Investor response to Federal Reserve interest rate increases of 75 basis points in June and again in September contributed to the Northern Trust U.S. equity program universe median return declining 4.4% for the third quarter. The S&P 500 large cap index was down 4.9% during the three-month period.

The Northern Trust Corporate (ERISA) universe median return was -6.4% for the third quarter. U.S. fixed income remains the largest asset class in ERISA plans, with a median allocation of 49.9%, and continued to grow as U.S. fixed income assets outperformed equities. The median allocation for U.S. equities was 20.1%.

The Northern Trust Public Funds universe median returned -3.8% in the quarter. Although public funds have relatively higher equity allocations, allocations to U.S. and international equities declined in the third quarter due to the global equity market sell-off, with median allocations to U.S. and international equities decreasing from 28.9% to 28.0% and from 13.2% to 11.7%, respectively. The median exposure to U.S. fixed income for public funds increased 3.0% to 23.7%.

The Northern Trust Foundation and Endowment (F&E) universe produced a -3.5% median return for the second quarter. The F&E median U.S. equity allocation grew to 19.5% in Q3 from 19.1% in Q2. The median allocation to private equity was 25.4% while the median allocation to U.S. fixed income remained below 10%.

Results of U.S. plan level universes as of September 30, 2022:

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 25 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2022, Northern Trust had assets under custody/administration of US$12.8 trillion, and assets under management of US$1.2 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 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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