Funding ratios for U.S. corporate pension plans increased in
April, according to reports from Wilshire Associates, Legal & General
Investment Management America and Mercer.
All three firms noted strong equity markets as the primary
driver for the increases, partially offset by a decrease in discount rates
leading to rising liability values.
Wilshire's monthly report said U.S. corporate pension plans'
aggregate funding ratio rose 0.6 percentage points to 92.9% in the month ended
April 30. The change was the result of a 2.2-percentage-point increase in asset
values partially offset by a 1.7-percentage-point increase in liability values.
April's funding ratio was the highest Wilshire had estimated
since September 2018, said Ned McGuire, managing director and a member of the
investment management and research group of Wilshire Associates, in a news
release announcing the results.
"April's increase in funded ratio was driven by positive
monthly returns for nearly all asset classes, led by the Wilshire 5000 Total
Market index, due to optimism around states beginning to reopen and improving
economic data," Mr. McGuire said.
LGIMA found in its monthly pension solutions monitor that the
funding ratio of a typical corporate pension plan increased by 0.4 percentage
points to 91.1% in April. LGIMA estimated U.S. Treasury rates fell by 12 basis
points while credit spreads tightened by 8 basis points, resulting in the
average discount rate dropping by 20 basis points.
Liabilities for the typical plan increased by 2.6%, while
plan assets with a traditional 60% equity/40% bond asset allocation increased
by about 3%, LGIMA said.
Finally, as measured by Mercer, the monthly estimated
aggregate funding ratio of defined benefit plans sponsored by S&P 1500
companies increased by 1 percentage point to 96% as of April 30 because of
continued strong performance of equity markets, partially offset by a drop in
discount rates to 2.89% from 3.01%.
The estimated aggregate deficit of pension fund assets of
S&P 1500 companies totaled $102 billion as of April 30, down $118 billion
from the end of March.
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