04/09/2024 | Press release | Distributed by Public on 04/09/2024 20:31
9/4/2024
Wilshire estimates 0.4 percentage point increase in aggregate funded ratio for U.S. corporate pension plans in August.
Santa Monica, Calif., September 4, 2024 - The aggregate funded ratio for U.S. corporate pension plans increased by an estimated 0.4 percentage points in August, ending the month at 102.3%, according to Wilshire, a diversified global financial services firm. Wilshire assists in providing a suite of OCIO and advisory services to some of the nation's largest retirement plans which help fund the retirement of millions of Americans.
This month's change in funded ratio resulted from a 1.7% increase in asset value slightly offset by a 1.3% increase in liability value. The aggregate funded ratio is estimated to have increased by 6.5% year-to-date, but decreased by 2.3% over the trailing twelve months.
"August's funded status improved due to the continued increase in asset values, with most asset classes posting positive monthly returns despite an early-month drawdown in global equity. At the beginning of the month, U.S. equity experienced a nearly -8.5% pullback due to concerns about a slowdown in economic growth following the release of theJuly labor market report, which missed expectations, and the worst loss for the Nikkei 225 since Black Monday in 1987. However, this drawdown was short-lived, as stocks quickly recovered, with multiple equity indices reaching all-time highs later in the month," commented Ned McGuire, Managing Director at Wilshire. "At the Federal Reserve's annual gathering in Wyoming, Fed ChairJerome Powell stated, "the time has come for policy to adjust." This led to expectations that the federal funds rate will be cut starting in September, and yields have begun to decrease in anticipation. Corporate bond yields, which are used to value corporate pension liabilities, have fallen for four consecutive months, cumulatively by more than 50 basis points. Despite the increase in liability values due to falling rates, asset values have risen more than liability values for the eighth consecutive month, resulting in an estimated aggregate funded ratio of 102.3% at the end of August," added Mr. McGuire.
A 12-month review of the funded ratio follows:
The aggregate figures represent an estimate of the combined assets and liabilities of corporate pension plans sponsored by S&P 500 companies with a duration in line with the FTSE Pension Liability Index - Short. The funded ratio is based on the FTSE - Short Liability, with service cost, benefit payments and contributions in line with Wilshire's 2024 corporate funding study. The most current month-end liability growth is estimated using a FTSE Pension Liability Index - Short duration matched weighting of the Barclays Long and Intermediate Aa+ U.S. Corporate Indices.
Wilshire's practice is to collect data on U.S. pensions from 10-K filings for companies in the S&P 500 Index at fiscal yearend (FYE). All data for fiscal year 2023 is based on the 253 S&P 500 Index constituents that maintain defined benefit pension plans as of year-end 2023. The estimated monthly funded ratios are based on liabilities, service cost, benefit payments and contributions in line with Wilshire's 2024 corporate funding study.
We should note that our estimated monthly funded status of U.S. corporate plans proxy private assets' returns using publicly available benchmarks. This year, our methodology provided higher than actual realized asset returns due to the difference in returns between private assets compared to public markets and this change was reflected as of December 31, 2023.
Wilshire is a leading global financial services firm and trusted partner to a diverse range of approximately 500 leading institutional investors and financial intermediaries. Our clients rely on us to improve investment outcomes for a better future. Wilshire advises on over $1.4 trillion in assets and manages $121 billion in assets as of June 30, 2024. Wilshire is headquartered in the United States with offices worldwide. More information on Wilshire can be found at www.wilshire.com
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