Funded Status of U.S. Corporate Pensions Falls to 90.1 Percent, According to BNY Mellon ISSG

NEW YORK, Sept. 4, 2014 /PRNewswire/ -- Falling interest rates precipitated by geopolitical tensions led to higher liabilities and a lower funded status for the typical U.S. corporate pension plan in August, while rising asset values benefited public plans, foundations and endowments, according to the BNY Mellon Investment Strategy and Solutions Group (ISSG).  

The funded status of the typical U.S. corporate pension plan in August fell 0.7 percentage points to 90.1 percent, as liabilities rose 3.3 percent, outpacing the 2.6 percent return for assets, according to the BNY Mellon Institutional Scorecard, which is prepared monthly by ISSG.

This funded status is now down 5.1 percent from the December 2013 high of 95.2 percent, according to the scorecard.

The higher liabilities for corporate plans in August resulted from the Aa corporate discount rate falling 21 basis points to 4.11 percent over the month.  Plan liabilities are calculated using the yields of long-term investment grade bonds. Lower or flat yields on these bonds result in higher liabilities. 

"Investors appeared to be torn between concerns about increased geopolitical tensions and optimism about the U.S. economy," said Andrew D. Wozniak, head of fiduciary solutions, ISSG. "Geopolitical concerns resulted in more interest in longer term corporate credit and government bonds, sending interest rates lower.   Optimism about the economy helped to push equities and other risk-based assets higher."

Public defined benefit plans in August exceeded their target by 1.3 percent as assets increased 1.9 percent, according to the monthly report.  Year over year, public plans exceeded their target by 7.6 percent, ISSG said.

For endowments and foundations, the real return in August was 1.1 percent, as assets returned 1.8 percent, ISSG said.   Private equity and real estate investment trusts, which comprise 15 percent and eight percent respectively of the asset portfolio, returned 2.5 percent over the month. Year over year, foundations and endowments are ahead of the inflation plus spending target by 6.3 percent, ISSG said.

Notes to Editors:

The BNY Mellon Investment Strategy and Solutions Group is a division of The Bank of New York Mellon.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.6 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of June 30, 2014, BNY Mellon had $28.5 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Learn more at www.bnymellon.com, or follow us on Twitter @BNYMellon.

All information source BNY Mellon as of June 30, 2014. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management to members of the financial press and media and the information contained herein should not be construed as investment advice.  Past performance is not a guide to future performance.  A BNY Mellon Company.      

SOURCE BNY Mellon

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