Funded Status of U.S. Corporate Pensions Rises to 92 Percent, According to BNY Mellon ISSG

NEW YORK, July 2, 2014 /PRNewswire/ -- The funded status of the typical U.S. corporate pension plan increased 1.4 percentage points in June 2014 to 92.0 percent, driven by rising asset values, according to the BNY Mellon Investment Strategy and Solutions Group (ISSG).  

"Corporate plans also benefited from a slight rise in interest rates, which reduced liabilities," said Andrew D. Wozniak, head of fiduciary solutions, ISSG. "June ended a string of three consecutive months of falling rates, which had been driving liabilities higher."

The BNY Mellon Institutional Scorecard for June notes assets at the typical corporate plan rose 1.4 percent and liabilities decreased 0.2 percent during the month. 

Year to date, the funded status of corporate plans is down 3.2 percentage points, according to the scorecard.

Public defined benefit plans, endowments and foundations also benefited from strong asset returns and exceeded their return targets, ISSG said.

"Equities have continued rallying since April as economic data appears to indicate strengthening global growth," said Wozniak. "If the funded status continues to rise, we expect more plans to implement strategies that better insulate them from future market volatility."

The decrease in liabilities for corporate plans in June was due to a 4-basis-point increase in the Aa corporate discount rate to 4.32 percent, the report said.   Plan liabilities are calculated using the yields of long-term investment grade bonds. Higher yields on these bonds result in lower liabilities. 

On the public side, defined benefit plans in June exceeded their target by 1.0 percent as assets led by small cap equities and private equity rose.  Year over year, public plans exceeded their target by 9.0 percent, ISSG said.

For endowments and foundations, the real return in June was 1.0 percent, exceeding the target for spending plus inflation, ISSG said.  This outperformance was driven largely by their exposure to private equity, which accounts for approximately 15 percent of the typical portfolios for endowments and foundations. Year over year, foundations and endowments are ahead of their target by 8.2 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 March 31, 2014, BNY Mellon had $27.9 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 March 31, 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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