The funded status of U.S. corporate defined benefit plans was relatively unchanged in October, said monthly reports from BNY Mellon, Wilshire Consulting and Mercer.
The funded status fell 40 basis points to 89.5%, down from 89.9% in September as liabilities rose more than assets, said the BNY Mellon Institutional Scorecard. Meanwhile, Mercer reported the funded status of S&P 1500 companies with DB plans remained at 84% for the second consecutive month, and Wilshire Consulting said the funded status of a typical DB plan fell 20 basis points to 85%.
Assets rose 1.5% in October compared to a 1.94% increase in liabilities, according to BNY Mellon. In October, the discount rate fell 11 basis points to 4.2%, causing liabilities to increase.
“(An) October swoon ended with an October boom,” said Andrew D. Wozniak, head of fiduciary solutions of the investment strategy and solutions group within BNY Mellon Investment Management, in a telephone interview. “We began the month at (nearly) 90% funded, midmonth (the funding ratio) got as low as 84%, and we ended the month at (nearly) 90%,” Mr. Wozniak said. “It was a very volatile month.”
Year-to-date through Oct. 31, the typical corporate DB plan was down 5.7 percentage points from a high of 95.2% at the end of December, Mr. Wozniak said.
From an asset class perspective, REITs and domestic small-cap equities had the best month, returning 7.3% and 6.6%, respectively. On the lower end of the spectrum were hedge funds and international equity, which returned -0.4% and -1%, respectively.
Separately, Wilshire Consulting said the funded status of a typical DB plan fell to 85% from 85.2% the previous month. Wilshire Consulting is the institutional investment consulting and outsourced CIO unit of Wilshire Associates.
In October, assets rose 1.4%. That gain was canceled out by falling corporate bond yields, which caused liabilities to rise by 1.7%.
Year-to-date Oct. 31, the funded status of a typical DB plan was down 4.8 percentage points from 89.8% as of Dec. 31, Wilshire estimates.
The figures are the result of estimates of combined assets and liabilities of S&P 500 firms that have defined benefit plans.
The estimated asset allocation is 33% domestic equity, 26% long-duration fixed income, 22% international equity, 17% core fixed income and 2% real estate.
In another monthly report, Mercer said the funded status of S&P 1500 companies with DB plans remained at 84% for the second consecutive month.
Falling interest rates offset rising equity markets, holding the funded status constant.
The discount rate fell 12 basis points to 3.98% in October, driving liabilities upward and outpacing equity markets, which returned 2.3% in October.
The collective estimated deficit of $367 billion at the end of October is up $15 billion from the end of September and up $131 billion from the end of December, Mercer said.
Estimated aggregate assets totaled $1.88 trillion as of Oct. 31, up 4.4% from Dec. 31. Estimated projected benefit obligations were $2.24 trillion, up 10.3% from the end of December.
