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Pension Funds

State pension funding rises nearly 3 percentage points in fiscal year 2017 – report

The aggregate funded status of 130 state pension plans rose 2.8 percentage points to 70.2% in fiscal year 2017, said Wilshire Consulting's most recent annual state pension funding report released Monday.

Of the 130 defined benefit plans analyzed, fiscal year 2017 data were available for 71. The remaining pension funds' 2017 data were estimated. Most of the plans analyzed had a fiscal year that ended June 30.

For the 71 plans that provided fiscal year 2017 data, pension fund assets grew by 9% over the year to $3.17 trillion, while liabilities increased 5% to $4.518 trillion. Overall assets were up 9.2% from 2016, while liabilities were up 5% from the year before.

"A primary driver of the improvement in the funding ratio was the increase in global equity values for the 12-month period ending June 30, 2017," said Ned McGuire, vice president and a member of the pension risk solutions group at Wilshire Consulting, in a news release on the results. "In fact, the estimated aggregate asset value is the highest since Wilshire began reporting on state retirement system funding levels."

Wilshire's report, which also looks at plans' asset allocation, found movement out of U.S. equities and into other growth assets such as non-U.S. equities, real estate and private equity over the past decade.

The average allocation to U.S. equities in 2017 was 29.9%, down 11.1 percentage points from 2007. Over the same time period, the average allocation to non-U.S. equities rose 0.5 percentage points to 18.7%, real estate rose 8.7 percentage points to 13.9%, and private equity rose 4.4 percentage points to 9%.

Looking at the other asset classes that Wilshire tracks, plans' average allocation to U.S. fixed income fell 4.5 percentage points during the 10-year period to 22.8%, while the average allocation to non-U.S. fixed income and other non-equity assets (cash and cash equivalents, commodities, hedge funds and other absolute-return strategies) rose 2.1 percentage points to 5.8%.