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Pension Funds

U.S. corporate plan funding ratios rise in April – 3 reports

The average U.S. corporate plan funding ratio rose in April, according to reports by Legal & General Investment Management America, Wilshire Consulting and Northern Trust Asset Management.

LGIMA found the funding ratio of a typical corporate pension plan increased by 1.8 percentage points to 87.4%, primarily driven by positive global equity returns.

LGIMA estimated Treasury rates increased by 12 basis points, while credit spreads decreased 9 basis points, resulting in the average discount rate rising 3 basis point.

Liabilities for the typical plan decreased 0.15%, while plan assets with a traditional 60% equity/40% bond asset allocation increased 2.1%, LGIMA said.

The estimated aggregate funding ratio for U.S. corporate pension plans sponsored by S&P 500 companies increased by 2 percentage points to 88.6% at the end of April from the end of March, Wilshire Consulting said in a monthly report.

The change resulted from a 1.6% increase in asset values and an 0.8% decrease in liability values. The aggregate funded ratio is up 4.1 percentage points year-to-date and flat over the trailing 12 months.

"April's improvement in funded ratios was driven by the increase in Treasury yields and positive public equity performance," said Ned McGuire, managing director and a member of the pension risk solutions group of Wilshire Consulting, in a news release. "April's 1.6 percentage point increase in asset value marks the fourth consecutive monthly increase, which is the longest such streak since January 2018."

As measured by Northern Trust, meanwhile, the average funding ratio for S&P 500 companies with corporate defined benefit plans rose to 89.6% to the end of April from 87.8% from the end of March.

Global equity markets were up 3.4% during April, while the average discount rate increased to 3.51% during the month from 3.45%, which led to lower liabilities, Northern Trust's report noted.

"April markets brought another month of improved funded status in pensions as the 2019 equity markets continue to help pensions climb back from the fourth quarter downturn of 2018," said Dan Kutliroff, head of OCIO business strategy at Northern Trust Asset Management, in a news release. "Plans that have adopted automated derisking glide paths can potentially limit their exposure to some of this volatility as they shift more of their assets to fixed income assets that behave similarly to the liabilities, as their funded status hits certain trigger points."