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Pension risk transfer assets ride yields in 2018

Through mid-November, global companies have executed 38 pension risk transfers, according to data collected by Pensions & Investments' Research Center. While not every transaction is reported along with the assets involved, of those that did report assets, $31.7 billion was unloaded by corporate pension plans so far in 2018. That number was up from the $20.2 billion the year before, but still below 2014's $60.1 billion. In 2014 there were 42 transactions, implying that while assets transferred are relatively lower, the average transaction size has been larger.

Interest rates play a significant role in the number and size of transactions. The 3% mark of the 10-year high-grade corporate bond yield-to-worst appears to be the demarcation line. Average annual rates above that point seem to entice plans to move on offloading assets as the transactions will cost less – by lowering the present value of their liabilities - relative to periods of lower rates.