Wilshire estimates more than one percentage point decrease in aggregate funded ratio of US corporate pension pans in July
The aggregate funded ratio for US corporate pension plans decreased by 1.3 percentage points in July to end the month at 79.9 per cent, according to Wilshire Associates (Wilshire), a diversified global financial services firm.
Through its suite of Outsourced Chief Investment Officer (OCIO) and advisory services, Wilshire assists in ensuring secure and safe retirements for millions of Americans, including those participating in some of the nation’s largest corporate and public retirement plans.
July’s 1.3 percentage point decline in funding resulted from a 5.6 per cent increase in liability values largely offset by a 4.0 per cent increase in asset values. The aggregate funded ratio is estimated to have decreased by 7.2 and 8.9 percentage points year-to-date and over the trailing twelve months, respectively.
“July’s decrease in funded ratio was driven by the increase in liability values. The increase in liability value was due to an approximate 20 basis point decline in treasury yields and 15 basis point decline in corporate bond spreads,” says Ned McGuire, Managing Director and a member of the Investment Management & Research Group. “July marks the first monthly decrease in funded ratio since the market recovery that started in April.”
The aggregate figures represent an estimate of the combined assets and liabilities of corporate pension plans sponsored by S&P 500 companies with a duration in line with the FTSE Pension Liability Index – Short. The funded ratio is based on the FTSE – Short Liability, with service cost, benefit payments and contributions in line with Wilshire’s 2020 corporate funding study. The most current month-end liability growth is estimated using the Barclays Long Aa+ US Corporate Index. The assumed asset allocation is below: