Administration September 1, 2005

Towers Benchmark DB Plan Turns In Stellar 2003 Showing

January 21, 2004 (PLANSPONSOR.com) - The investment return for a benchmark defined benefit plan used in an analysis of US capital markets shows the benchmark soared in 2003 to a whopping 20.7% performance - its best since 1995.

Reported by

Fred Schneyer

According to the Towers Perrin study, despite a 0 .5% decline in the benchmark plan’s discount rate, which acted to increase plan liabilities by 12.7% during the year, the plan’s funded ratio went from 80.1% at the start of 2003 to 85.2% by year’s end

After three years of a bear market, US equities rebounded strongly in 2003. Small/mid-cap stocks were the year’s best performers with stellar returns of 45.5%, the highest return for any asset class since 1991. International issues had a very strong year, returning 38.6%, and large-cap stocks came in at 28.7%. The benchmark plan’s 20.7% portfolio return represents only the ninth year over the past 30 in which returns broke a 20% barrier. In contrast, the benchmark plan’s portfolio returns for the prior three years averaged -4.3%.

Meanwhile, fixed-income securities could only muster moderate gains in 2003, according to the Towers study. Long bonds came in at 4.8% for the year.

Towers Perrin has been tracking the performance of a benchmark pension plan since 1990 with a focus on linked asset/liability results. The benchmark plan’s 60% equity, 40% fixed-income portfolio is about the same as the average asset allocation portfolio of assets for pension plans sponsored by the 300 large companies included in the firm’s retirement financial management benchmarking database. The more conservative 40% equity portfolio produced a 14.9% return, while a more aggressive 80% equity mix enjoyed a 26.8% 2003 showing.

The full report is here .