2001 DB Survey: Large Plan Returns Lag in 2000

March 28, 2001 (PLANSPONSOR.com) - The investment returns of the nation's largest pension plans were roughly half that of their smaller cousins in 2000, with an average return of just 2.4%, according to additional analysis of PLANSPONSOR's 2001 Defined Benefit Survey data.

The difference could be explained by an overweighting in growth equities by larger plans, which suffered a sharp downturn in 2000.  Equally plausible is a higher proportionate investment in fixed income securities by medium and smaller portfolios.  As a general rule, bonds fared better than equities last year.   

The average return of plans with less than $200 million in assets was 4.6%, compared with a 4.3% average for plans with between $200 million and $1 billion in assets.  Plans with more than a billion in assets lagged the field.  The overall return for the more than 400 plans represented in the survey was 4.1%.

Negative Results

However, roughly a quarter of those plans providing information in the annual survey reported a negative overall return.  The only exceptions to be found were among plans larger than $10 billion, and those with less than $10 million in assets, where only one plan suffered a loss.

On a more positive note, nearly 16% reported returns in excess of 10% for the year ended December 31, 2000.

The return targets were remarkably consistent across all plan sizes

  • 8.4% on average for the largest
  • 8.6% for the middle market
  • 8.5% for those with less than $200 million in plan assets

Despite those averages, nearly 70% of the respondents had return targets less than 8%.  On the other hand, a disproportionately large percentage of plans with less than $50 million in plan assets (roughly 11%) had targets in excess of 10%. 

Funding Status

Despite the mismatch in last year’s numbers, over half (57%) were overfunded, a result comfortably consistent across the spectrum of plan sizes.  Roughly 5% were less than 80% funded, a result also consistent across the board. 

Nearly two-thirds of survey respondents (62%) made a pension contribution in the past 12 months, with a like number anticipating a contribution this year. Ten percent had made a contribution to their plan in the past 1-2 years, while nearly a third (29%) had gone more than two years without doing so.