UBS: Moderate rebalancing expected among U.S. corporate pension plans

U.S. corporate pension plans likely will rebalance their portfolios moderately before the end of 2013, according to a report from UBS Securities.

According to the Dec. 19 UBS Portfolio Advisor newsletter, based on estimates applied to $5 trillion in U.S. corporate defined benefit pension plan assets, plans will sell between $15 billion and $19 billion of equities and buy between $6 billion and $8 billion of fixed income, as part of rebalancing exercises before the end of December.

Within equities, UBS estimates outflows of $17 billion to $21 billion of domestic large-cap equities, with insignificant flows in domestic small-cap, developed EAFE and emerging markets holdings.

UBS also estimates a subset of large U.S. corporate defined benefit pension plans is becoming fully funded, estimating a 98% funding ratio at the end of 2013 for large plans compared to an estimate of 80% at the end of 2012.

UBS' estimates are based on the assumption of a typical asset allocation of 55% in equities spread among developed EAFE, emerging markets, domestic large cap and domestic small cap; 30% in investment-grade fixed income; and 15% in illiquid assets.