Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Canadian Pension Risk Strategies
    • 2023 Retirement Income
Breadcrumb
  1. Home
  2. Online
March 05, 2008 12:00 AM

Wilshire finds big hikein state retirement plan funding ratios

Drew Carter
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    SANTA MONICA, Calif. — The funded status of state retirement systems improved seven percentage points in 2007, according to Wilshire Associates’ annual state pension plan funding and asset allocation report expected to be released March 6.

    Wilshire estimated the aggregate asset-to-liability ratio of the 125 plans studied at 95% as of June 30, 2007, up from 88% a year earlier.

    The same plans were 95% funded in 2001 before slipping to 81% in 2002 and 2003, according to the report.

    It remains to be seen whether funding ratio increases in 2007 will hold, because fiscal years ended June 30, just before equity returns began falling. “If we had the luxury of having instantaneous information … I don’t think there’s any question we’d see a deterioration of the 95% level of ’07,” said Steven J. Foresti, managing director at Wilshire and one of the study’s authors.

    State pension plan portfolios allocated 68.9% to equities (including real estate and private equity) and 31.1% to fixed income on average in 2007, the report says. Wilshire estimated a median long-term annual return of 7.6% on assets, 40 basis points behind the median actuarial interest rate assumption of 8%.

    Of the 125 plans tracked, 56 were analyzed using 2007 data, 60 with 2006 data and nine using 2005 data.

    Aggregate assets of the 56 plans rose 14.7%, or $118.3 billion, to $924.2 billion in 2007. Liabilities increased 6.8%, or $64.3 billion, to $1.01 trillion.

    Three-fourths of the 56 plans with current were underfunded using market-value assets, with an aggregate funding ratio at 82%. Almost 68% of those plans were at least 80% funded, with just three plans less than 60% funded. The 14 plans with assets greater than liabilities had an aggregate funding ratio of 113%.

    Using actuarial-value assets, 87.5% of plans were underfunded.

    State plans have seen a “fairly dramatic shift in asset allocation” in the past five years, Mr. Foresti said. Overall equity allocations rose 7.9 percentage points in the average state pension plan to 68.9% of total assets from 61% in 2002; non-U.S. equity grew 5.5 points, to 18.2% of total assets in the same period. Domestic bond allocations lost 5.1 points, dropping to 26.4% in 2007 from 31.6% of assets in 2002.

    Other allocations were: 41% U.S. equity, 5.2% real estate, 4.6% private equity, 0.9% non-U.S. bonds and 3.7% “other.”

    Asset allocations varied widely among the plans. Thirty-eight of the 125 pension systems allocated at least 75% to equities, while three allocated less than half of their assets to equities. The 25th to 75th percentile range for equity allocations was 63.8% to 75%.

    The move toward greater equity allocations increased risk more than it did rewards, according to the report. Returns increased 30 basis points, from 7.3% in 2002 to 7.6% in 2007, while risk — a measure calculated by Wilshire — rose 1.2 percentage points, to 11.1% in 2007.

    “Only time will show” whether the decisions to increase risk in state pension investments will pay off, Mr. Foresti said. “All things being equal … you’d expect (future) returns to be more volatile than in the past.” The same goes for funding ratios, he said. However, most plans have diversified their equity allocations with private equity, real estate and non-U.S. equity exposures.

    Wilshire forecasts that just 21 of the 125 state pension systems, or 16.8%, will meet or exceed their actuarial interest rate assumptions. “This is down noticeably from the 30 state retirement systems” expected in the 2006 report, the report states.

    Predicted returns ranged from 5% for the lowest state plan to 8.2% for the highest.

    Recommended for You
    memorial-day-flag_i.jpg
    No P&I Daily on Memorial Day
    Good_Friday_i.jpg
    No P&I Daily on April 7
    Global Macro as a Much-Needed Diversifier
    Sponsored Content: Global Macro as a Much-Needed Diversifier

    Reader Poll

    May 1, 2023
     
    SEE MORE POLLS >
    Sponsored
    White Papers
    Counting on a Crisis: A Catalyst for Investment Innovation?
    A Strategic Allocator's Guide to Productivity and Profits
    Biodiversity: why investors should care
    Quantifying sustainability – the numbers, the data, and the people
    Valuing Banks: Hidden Losses Versus Assets
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Canadian Pension Risk Strategies
      • 2023 Retirement Income