A rising rate environment may not be the worst thing for pension plans. Actions taken by the Fed affect short-term rates, but draw a less predictable path for the long end of the yield curve. Corporate pension plans have increased their fixed-income allocations as well as taken on more duration as the result of moving to LDI structures. Equity and overall plan returns have performed well in rising rate environments, ultimately improving funding ratios.
*Yields of the Bloomberg Barclays U.S. Long Government/Credit Index. Sources: Milliman; Bloomberg LP; P&I Research Center
Compiled and designed by Charles McGrath and Gregg A. Runburg