For the typical corporate plan in October, assets increased 1.5%, trailing the 1.9% increase in liabilities, the BNY Mellon Institutional Scorecard shows. This funded status is now down 5.7% from the December 2013 high of 95.2%.
ISSG attributed the higher assets for corporate plans in October to the improvement in U.S. equities, although falling international equities restrained the overall improvement in asset values.
The higher liabilities for corporate plans in October resulted from the Aa corporate discount rate falling 11 basis points to 4.20% over the month. Plan liabilities are calculated using the yields of long-term investment grade bonds. Lower yields on these bonds result in higher liabilities.
“While the funded status of corporate plans was slightly down for the month, the early part of the month was much worse,” notes Andrew D. Wozniak, head of fiduciary solutions, ISSG. “For the first two weeks, falling stock markets and bond yields drove the funded status down to 84.4% on October 15. For the last two weeks of the month, the funded status rebounded 5.1%.”
Equity markets began rebounding on October 16 following the release of positive economic data.
According to the monthly report, public defined benefit plans in October beat their targets by 0.6% as assets rose 1.2%. Year over year, public plans have underperformed their return target by 1.4%, ISSG said.
For endowments and foundations, the real return in October was 0.8%, as assets returned 1.2%. Real estate investment trusts, which comprise 8% of the typical asset portfolio, gained 7.3% over the month. Year over year, foundations and endowments are behind their inflation plus spending target by 0.9%, ISSG said.