Funded Status of U.S. Corporate Pensions Rises to 92.6 Percent, According to BNY Mellon ISSG

NEW YORK, March 5, 2014 /PRNewswire/ -- The funded status of the typical U.S. corporate pension plan improved 1.7 percentage points in February 2014 to 92.6 percent as most asset classes gained during the month, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG).    The BNY Mellon Institutional Scorecard for February noted the gains in asset values outpaced the rise in liabilities, which resulted from falling interest rates.

Year to date, the funded status of the corporate plans is down 2.6 percentage points, according to the scorecard.

"The financial status of pensions, endowments and foundations in February recovered a significant amount of the ground they lost in January as most asset classes recovered," said Andrew D. Wozniak, director, portfolio management and investment strategy, ISSG. "Concerns about global growth fundamentals that had surfaced in January appeared to abate somewhat in February.  Commodities were the best performing asset class in February, rising 6.24 percent."

For U.S. corporate plans, assets increased 3.3 percent and liabilities increased 1.4 percent during the month, ISSG said.  The increase in liabilities in February was due to an eight-basis-point decline in the Aa corporate discount rate to 4.58 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 February rose 3.5 percent, producing excess return of 2.9 percent above the monthly goal of positive 0.6 percent returns, ISSG said.  Year over year, public plans are ahead of their target by 4.9 percent, ISSG said.

For endowments and foundations, the real return was 3.0 percent, which exceeded the target for spending plus inflation, ISSG said.  Investments in commodities and real estate helped endowments and foundations to strong performance in February, the report said.

Mellon Capital Management, BNY Mellon's San Francisco-based multi-asset manager, attributed the spike in commodities to unusual weather conditions in the U.S. and abroad, setting off concerns about potential grain shortages.

"We do not view the rise in commodities as a signal of future excessive inflation," said Suzanne Ly, vice president, asset allocation portfolio management, Mellon Capital. "The strength in the commodity markets should abate as the weather normalizes and inflationary pressures remain low."

Wozniak said plan sponsors continue to show interest in strategies to hedge their portfolios against market volatility.  "Many sponsors view the continuing financial strength of corporate pensions as an opportunity to lower the risks they face," he said.

Notes to Editors:

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

Founded in 1983 by innovators in the investment management field, Mellon Capital Management Corporation applies a disciplined and analytical approach to global investment management strategies. As of December 31, 2013, the firm had $354.7 billion in assets under management, including assets managed by dual officers of Mellon Capital Management Corporation, The Bank of New York Mellon and The Dreyfus Corporation, and $6.1 billion in overlay strategies. Additional information about Mellon Capital is available at www.mcm.com.  It is part of BNY Mellon Asset Management, one of the world's largest asset managers.

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.               

SOURCE BNY Mellon

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