A sharp decline in the value of the U.S. dollar in 2004 led to increases in pension liabilities of foreign affiliates of American companies, according to a new study by Stephen L. Nesbitt, CEO of Cliffwater. Because American companies list their holdings in dollars, a decline in the currency's value resulted in a $14 billion increase in pension liabilities for foreign subsidiaries, Mr. Nesbitt noted in the study. This hike led to a 1% increase in overall pension liabilities for the companies in the S&P 500 index.
Although assets of foreign affiliates of U.S. companies also rose as a result of the dollar's decline, the increase was overshadowed by the $4 billion net change in unfunded pension liabilities for the S&P 500 companies.
