Goodyear Tire & Rubber Co., Akron, Ohio, had the highest fixed-income allocation on P&I's list, with 89% of the plan's $5 billion in assets allocated to fixed income in 2015.
After freezing its plans for U.S. hourly workers and making a $1.2 billion contribution in 2014, Goodyear “changed its target asset allocation for these plans to a portfolio of substantially all fixed-income securities designed to offset the future impact of discount rate movements on the plans' funded status,” the company's 10-K said in 2014.
Goodyear had $5.34 billion in liabilities and a funding ratio of 93.9% in 2015, with allocations of 5.9% to private equity, 4.8% to cash, 0.2% to other investments and 0.1% to equities.
In 2015, 41 plans on P&I's list had fixed-income allocations of 40% or more.
Although not all plans have committed to a liability-driven investment strategy, Mr. Eichhorn said that, on average, most corporate plans have taken some action over the past decade to offset market volatility and interest rate changes.
“While risks remain, there have been meaningful steps over the past 10 years that have helped inoculate plans against volatility in the markets. Some plans are nearly fully insulated. They've basically derisked and they're at their end state,” Mr. Eichhorn said.
Other plans bet less on fixed-income holdings.
Weyerhaeuser Co., Federal Way, Wash., with more than 60% of its assets in hedge funds, had one of the highest returns for the year ended Dec. 31 at 4.1%, or $226 million, which helped bump up the plan's funding ratio to 88.4% from 84.2% in 2014.
With $3.44 billion of its $5.49 billion in assets allocated to hedge funds in 2015, Weyerhaeuser had the highest allocation to alternatives for the second consecutive year. The allocation to hedge funds increased 2.1 percentage points in 2015 to 62.6%. In addition to hedge funds, the plan allocated 23.1% to private equity, 13% to fixed income, 1.2% to real estate and 0.1% to equities.
Merck & Co. Inc., Kenilworth, N.J., had the most aggressive equity allocation in 2015 at 80.2%, including a 7.8% allocation to international equities. Assets dropped $226 million for the year, or a -2.44% return on its $9.27 billion portfolio. Despite the negative return, Merck's funding ratio rose to 95.3% in 2015 from 93.9% following a 60-basis-point rise in the discount rate to 4.8% that reduced liabilities to $9.72 billion from the previous year's $10.63 billion. Other asset allocations were 17.5% to fixed income, 2% to cash and 0.3% to other investments.
The aggregate allocation to equities in P&I's universe was 34.7% in 2015 vs. 35.8% in 2014; the overall allocation to alternatives increased to 18% from 16.8% the previous year; private equity declined to 5.8% from 6.3%; hedge funds for the top 100 plans increased slightly to 5.3% from 5.2%; real estate increased to 4.5% in 2015 from 3.9%; cash had the same 3.6% allocation in both years; and the allocation to other investments was 2.7% in 2015 vs. 2.6% in the previous year.
The average long-term assumed rate of return on plan assets also dropped in 2015. The average declined to 7.32% from 7.51% in 2014, 7.55% in 2013, 7.73% in 2012 and 7.94% in 2011.