Funded Status of U.S. Corporate Pensions Falls to 90.8 Percent, According to BNY Mellon ISSG

NEW YORK, Aug. 4, 2014 /PRNewswire/ -- The funded status of the typical U.S. corporate pension plan declined 1.2  percentage points in July 2014 to 90.8 percent, as the steep drop in equity prices at the end of July sent asset values lower, according to the BNY Mellon Investment Strategy and Solutions Group (ISSG).  

"Funded status performance in July was a tale of two markets, July 31st and the rest of the month," said Andrew D. Wozniak, head of fiduciary solutions, ISSG. "Unfortunately, for plan sponsors, July 31st completely reversed what would have been a positive month for funded status, although losses at corporate plans were cushioned by their holdings in long duration corporate bonds.  We estimate that the typical U.S. corporate plan is allocating approximately 26 percent of its assets to long duration bonds as it implements liability driven investing (LDI) programs."

The BNY Mellon Institutional Scorecard for July notes assets at the typical corporate plan fell 1.0 percent and liabilities rose 0.3 percent during the month.  The slight increase in liabilities for corporate plans in July was due to the Aa corporate discount rate remaining at 4.32 percent, the report said.   Plan liabilities are calculated using the yields of long-term investment grade bonds. Lower or flat yields on these bonds result in higher liabilities. 

Year to date, the funded status of corporate plans is down 4.4 percentage points, according to the scorecard.

On the public side, defined benefit plans in July missed their target by 2.0 percent as assets fell 1.4 percent, according to the monthly report.  Year over year, public plans exceeded their target by 3.7 percent, ISSG said.

For endowments and foundations, the real return in June was -2.4 percent, as assets declined 1.7 percent, ISSG said.  Sharp declines in small cap and private equities led the decline. Year over year, foundations and endowments are ahead of their target by 2.7 percent.

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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