to a UBS “Portfolio Advisor” report, in 2013, U.S. stocks continued to surge
and bond yields have remained near yearly highs—improving both sides of pension
balance sheets. A subset of large corporate pension funds is approaching fully
report says this has been achieved in no small part thanks to sponsors' record
contributions in the past few years. UBS estimates companies have been writing
checks to pensions to the tune of $60 billion to $80 billion annually in the
past few years.
company notes it is no small secret that many DB plan sponsors are looking to transfer
their responsibilities for pension liabilities. While that goal seemed remote when funded
ratios were in the 70% to 80% range, sponsors of fully funded plans are in a
position to move forward on immunizing and offloading pension liabilities.
would help lower corporate earnings volatility going forward, but it would also
potentially create a great generational divide. While current retirees and
those approaching retirement would enjoy a decent level of income promised by
fully funded pension plans, employees in the early stages of their career and
future generations would not see that kind of benefit at retirement,” the report
UBS data also shows a trend of moderate rebalancing among pension plans. The firm
estimates defined benefit funds will sell $15 billion to $19 billion of
equities and buy $6 billion to $8 billion of fixed income—including both public-
and private-sector funds. Within key equity asset classes, UBS sees sizable $17
billion to $21 billion sales of U.S. large cap. Flows in other equity sectors
should be very small.
For the last three
years, U.S. pensions have conducted moderate stock sales and small fixed income
purchases during the fourth quarter.