Natixis Investment Managers Solutions portfolio consultants monitor asset classes, investment products, and market activity both in real time and from a historical perspective. Five trends tracked in institutional portfolios thus far in 2024 are summarized below.
1. E&Fs lead performance pack.
Institutional portfolios posted strong returns in Q1 2024, with endowment/foundation and public pension median returns outpacing Taft Hartley and corporate pensions.
Trailing 1yr through Q1 2024 by percentile
2. Complexity not rewarded.
Despite the strong returns, many foundations continue to lag broad benchmarks over longer time periods. Through Q1 2024, the median US foundation has trailed a 60% S&P 500®, 40% Bloomberg Aggregate portfolio by nearly 2% annualized since 1/1/2011. Larger foundations above $500 million in AUM fared much better, trailing the 60/40 bench by just 0.2% annualized.
Annualized returns since 2011
3. Bond strategies pick up flows.
By asset flows, the institutional asset category with the largest gains was US fixed income, due in part to strong relative performance for equities, leading to rebalancing opportunities. Private debt continued to post the strongest growth on a percentage basis.
Institutional flows ($billions)
4. Investment return assumptions stabilizing.
Higher yields and strong equity returns have stalled much of the momentum in recent years toward US public pension funds applying more conservative assumptions. Still, 71% of US public funds have reduced their assumption in the past four years, bringing the national average down from 7.2% to 6.9%.
Average investment return assumption
5. Private equity distributions dry up.
Muted IPO and M&A activity have led private equity managers to hold elevated levels of unsold assets vs. history. This means that the internal rate of return (IRR) model used for performance measurement has become more valuation driven. An alternative measure of returns, distributed to paid in capital (DPI), is much lower than usual for recent vintages.
US private equity exit volume ($billions)
The S&P 500® Index is a widely recognized measure of US stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large-cap segment of the US equities market.
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Institutional investing trends
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