Corporate pension plans saw modest improvement in funding during the second quarter. Estimates from Legal & General Investment Management America show that plans' average funded status rose to 75% from 74% over the three-month period. In the prior quarter, the estimated funded status fell 9 percentage points as equity markets, interest rates and credit spreads fell markedly.
Pension fund assets rose on recovering equity markets, and despite an up-and-down June, the S&P 500 index was up about 20% on the quarter and the MSCI ACWI ex-U.S. rose about 16% — enough to offset the impact of lower interest rates. The liability side of the equation was impacted by falling corporate bond yields. Spreads of A through AAA credit fell 62 basis points, while Treasury rates remained overall stable.
Legal & General bases estimates of a traditional asset portfolio of 60% global equities and 40% U.S. aggregate bonds.