Funded Status of U.S. Corporate Pensions Falls to 92.1 Percent, According to BNY Mellon ISSG

Public Plans, Foundations and Endowments also Lose Ground

News provided by

Apr 02, 2014, 10:00 ET

NEW YORK, April 2, 2014 /PRNewswire/ -- The funded status of the typical U.S. corporate pension plan declined 0.5 percentage points in March 2014 to 92.1 percent as liabilities increased faster than assets, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG).

The BNY Mellon Institutional Scorecard for March noted liabilities rose 0.7 percent, outpacing the 0.3 percent increase in assets during the month.

Year to date, the funded status of corporate plans is down 3.1 percentage points, according to the scorecard.

Public defined benefit plans, endowments and foundations also lost ground as they failed to attain their targeted returns, ISSG said.

"Despite a high degree of volatility in March, the markets finished the month close to the same levels that they began," said Andrew D. Wozniak, director, portfolio management and investment strategy, ISSG. "Asset returns were restrained, leading to slightly weaker funded status for corporate plans and preventing public plans, endowments and foundations from reaching their targeted returns."

Wozniak added, "With the net decline in funded status through the first three months of 2014, plan sponsors were less motivated to reduce their exposure to market volatility. This was in marked contrast to 2013, when we saw a significant move toward reducing risk."

The increase in liabilities for corporate plans in March was due to a two-basis-point decline in the Aa corporate discount rate to 4.56 percent, the report said. Plan liabilities are calculated using the yields of long-term investment grade bonds. Lower yields on these bonds result in higher liabilities.

On the public side, assets at the typical defined benefit plan in March rose 0.1 percent, producing excess return of -0.6 percent, missing the goal of positive 0.6 percent returns, ISSG said. Year over year, public plans are ahead of their target by 3.6 percent, ISSG said.

For endowments and foundations, the real return in March was -0.6 percent, missing the target for spending plus inflation, ISSG said. This underperformance was driven largely by their exposure to private equity, which declined 1.4 percent in March, the report said. Year over year, foundations and endowments are ahead of their target by 4.1 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 December 31, 2013, BNY Mellon had $27.6 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). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.

All information source BNY Mellon as of December 31, 2013. 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.

Contact: Mike Dunn
+1 212 922 7859
[email protected]

SOURCE BNY Mellon