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Pension Funds

U.S. corporate pension funding holds steady or improves slightly — 2 reports

The funded status of U.S. corporate pension plans stayed the same or showed slight improvement in the fourth quarter of 2017, said reports from Legal & General Investment Management America and Barrow, Hanley, Mewhinney & Strauss.

According to LGIMA, the funded status of a typical U.S. corporate pension plan with a 60% allocation to global equity and 40% to core fixed income remained at 84%, unchanged from the third quarter as increasing liabilities offset positive asset returns. Assets for the typical plan rose 3.39% over the quarter driven by positive global equity and domestic equity returns of 5.84% and 6.64%, respectively. Liabilities, meanwhile, rose 3.47%, driven by a 17-basis-point drop in discount rates.

For the year ended Dec. 31, the funded status is up 3 percentage points, according to LGIMA.

In another quarterly report, Barrow, Hanley, Mewhinney & Strauss found that the average funded status of corporate pension plans sponsored by Russell 3000 companies rose 1.7 percentage points in the fourth quarter to 87.1% as of Dec. 31.

The funding increase was driven by an estimated 3.6% investment return, which outpaced a 1.5% increase in liabilities for the quarter.

For the year ended Dec. 31, the funded status is up 5.8 percentage points.

By sector, financials had the highest funded status as of Dec. 31 at 96.8%; followed by industrials, 85.4%; materials, 84.8%; real estate, 84.3%; information technology and consumer staples at 84% each; consumer discretionary, 83.6%; utilities, 83.3%; health care, 83%; telecommunications, 82.8%; and energy, 82.4%.