Based on the most recent fiscal year-end financial statements, approximately 39% of the S&P 1500 companies’ pension plan assets were invested in bonds, according to a Mercer news release. Allowing for the relative performance of bonds versus other asset classes in 2009 and assuming no rebalancing during the year, the expected allocation to bonds at year-end 2009 would have been 36%.
“Although the one-year change in asset allocation is relatively small, it appears to be part of a longer-term trend,” said Adrian Hartshorn, a partner in Mercer’s Financial Strategy Group, in the press release. “We anticipate that this trend will continue as the funded status of plans improves and as more plans are frozen and become mature.”
The latest figures from Mercer based on updated analysis of plan sponsors’ financial statements also shows that the funded status of pension plans sponsored by the S&P 1500 companies was 84% at the end of March compared to 83% at the end of February. This is equivalent to a deficit of $252 billion at the end of March compared with a deficit at the end of February of $256 billion, the news release said.
The 2009 year-end deficit was $247 billion, corresponding to a funded status of 84%.
“In addition to switching physical assets to bonds from equities we are also seeing plan sponsors use financial instruments (swaps, and options) as they seek increasingly to match their liabilities. Additionally many plan sponsors are setting pre determined dynamic asset allocation strategies that will automatically move assets to more closely match liabilities over time,” said Hartshorn.Mercer estimates the aggregate combined funded status position of plans operated by S&P 1500 companies on a monthly basis. Estimated aggregate surplus/deficit position and the funded status of all plans operated by companies in the S&P 1500 is based on projections of their reported financial statements adjusted from each company’s financial year end to March 31 in line with financial indexes and includes U.S. domestic qualified and non-qualified plans and all non-domestic plans.