LGIMA said the funding ratio of a typical corporate pension plan increased by 3.5 percentage points to 87% as of Feb. 28 from Jan. 31, primarily driven by strong equities performance and higher liability discount rates. LGIMA estimated U.S. Treasury rates rose by 38 basis points while credit spreads tightened by 8 basis points, resulting in the average discount rate increasing by 30 basis point.
Liabilities for the typical plan remained decreased by roughly 3.2%, while plan assets with a traditional 60% equity/40% bond asset allocation increased by roughly 0.8%, LGIMA said.
Wilshire's monthly report, meanwhile, noted that the aggregate funding ratio for U.S. corporate plans increased by 3 percentage points to 90.8% as of Feb. 28 from Jan. 31. The monthly change in funding resulted from a 4.4 percentage-point decrease in liability values partially offset by a 1.1 percentage-point decrease in asset values.
"February's increase in funded ratio was primarily driven by the decrease in liability values as corporate bond yields used to value corporate pension liabilities are estimated to have increased by over 25 basis points, driven by the significant increase in Treasury yields over the latter half of the month," said Ned McGuire, managing director and a member of the investment management and research group of Wilshire Associates, in a news release announcing the results. "February's liability value decrease was the largest since March 2020 when the markets first reacted to the COVID-19 pandemic."