September Pounded Pensions with Continued Negative Returns

The aggregate funded ratio for U.S. corporate pension plans decreased 2%.

The aggregate funded ratio for U.S. corporate pension plans decreased, to 81.3%, for the month of September, according to Wilshire Consulting, the institutional investment advisory and outsourced-CIO business unit of Wilshire Associates Incorporated. 

The funding dip was the result of a decrease in asset value and an increase in liability value.

“We estimate that overall the funded ratio for the plan sample decreased by 2.0% from 83.3% in August to 81.3% in September,” says Ned McGuire, vice president and member of the Pension Risk Solutions Group of Wilshire Consulting. “The decline in funding levels was driven by a 0.6% increase in liability value and a 1.8% decrease in asset value. The asset result is due to negative returns for equities, while the liability value increased due to a decrease in corporate bond yields.” 

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 Citi Group Pension Liability Index Intermediate. The Funded Ratio is based on the CPLI Intermediate liability, with service cost, benefit payments and contributions in-line with Wilshire s 2015 corporate funding study.  The most current month-end liability growth is estimated using the Barclays Long Aa+ U.S. Corporate Index. 

The assumed asset allocation is:

  • U.S. Equity – 32%;
  • Non-U.S. Equity – 21%;
  • Core Fixed Income – 18%;
  • Long Duration Fixed Income – 27%; and
  • Real Estate – 2%.