The standard ways to diversity a portfolio, through real estate, private equity, hedge funds, “didn’t do well over the last year,” said Robert Waid, managing director for the analytics arm of Wilshire Associates. “It’s clear that diversification hasn’t paid off the last four quarters when U.S. equities and U.S fixed income markets are the better performing asset class.”
Pension Funds
University funds weren’t the only institutional investors to see low returns.Public pension funds with more than $1 billion in assets posted annualized returns of 7.35 percent in the 20 years through fiscal 2016, the lowest ever recorded by the service, which dates back 35 years.
Public pensions had a median increase of 1 percent for the year ended June 30, the smallest advance since 2009, when the funds lost 16.2 percent.
State and local pensions count on annual gains of 7 percent to 8 percent to pay retirement benefits for teachers, police officers and other civil employees. When pensions don’t meet their targets, governments often put more taxpayer money into the funds to make up the difference. The need to do so has led to credit-rating cuts for New Jersey and Illinois, which are being squeezed by rising retirement bills.
The survey is an effort between Santa Monica, California-based Wilshire Associates and custodial organizations that submit asset positions and performance data.