‘Lacklustre’ March for US pension plans, says ISSG
08 April 2015 New York
Image: Shutterstock
The funded status of typical US corporate pension plans fell by 0.4 percentage points in March 2015, declining to 87.2 percent, according to the BNY Mellon Investment Strategy and Solutions Group (ISSG).
The result came as the majority of equity categories came. According to the BNY Mellon Institutional Scorecard, public plans, endowments and foundations all missed their targets for the month as asset classes lost value.
For the typical US pension plan, assets decreased by 0.5 percent in March, and liabilities fell by 0.1 percent as the Aa corporate discount rate rose by 2 percentage points to 3.86 percent.
These liabilities are calculated using the yields of long-term investment grade bonds, with higher yields on bonds resulting in lower liabilities.
Compared to this point in 2014, funded status has fallen by 4.9 percentage points, and by 0.1 percentage points compared to the beginning of 2015.
According to ISSG, public defined benefit plans missed their return target by 1.3 percent in March, as assets had a negative return of 0.7 percent. Year-on-year, public plans remained below their target by 2.7 percent.
For endowments and foundations, the final return in March was negative 1.1 percent, as assets returned negative 0.9 percent. Year-on-year, they are missing their inflation plus target by 2 percent, according to ISSG.
Andrew Wozniak, head of fiduciary solutions at ISSG, said: "March was a lackluster month for most markets, with little fluctuation in asset values."
He added: "However, volatility increased as investors anticipate a shift in U.S. monetary policy. Higher rates would reduce liabilities, although investors would have to decide where to allocate assets so they are best positioned in the new interest rate environment."
The result came as the majority of equity categories came. According to the BNY Mellon Institutional Scorecard, public plans, endowments and foundations all missed their targets for the month as asset classes lost value.
For the typical US pension plan, assets decreased by 0.5 percent in March, and liabilities fell by 0.1 percent as the Aa corporate discount rate rose by 2 percentage points to 3.86 percent.
These liabilities are calculated using the yields of long-term investment grade bonds, with higher yields on bonds resulting in lower liabilities.
Compared to this point in 2014, funded status has fallen by 4.9 percentage points, and by 0.1 percentage points compared to the beginning of 2015.
According to ISSG, public defined benefit plans missed their return target by 1.3 percent in March, as assets had a negative return of 0.7 percent. Year-on-year, public plans remained below their target by 2.7 percent.
For endowments and foundations, the final return in March was negative 1.1 percent, as assets returned negative 0.9 percent. Year-on-year, they are missing their inflation plus target by 2 percent, according to ISSG.
Andrew Wozniak, head of fiduciary solutions at ISSG, said: "March was a lackluster month for most markets, with little fluctuation in asset values."
He added: "However, volatility increased as investors anticipate a shift in U.S. monetary policy. Higher rates would reduce liabilities, although investors would have to decide where to allocate assets so they are best positioned in the new interest rate environment."
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