Funding ratios for corporate pension plans rose in November, according to reports from Wilshire Consulting, Northern Trust Asset Management, Mercer and Legal & General Investment Management America.
Wilshire's monthly report noted that the aggregate funding ratio for U.S. corporate plans increased by 1 percentage point as of Nov. 30 to 86.8% from Oct. 31. The monthly change in funding was due to a 0.9-percentage-point increase in asset values and a 0.3 percentage-point decrease in liability values.
"November's increase in funded ratio was driven by the increase in asset value resulting from positive public equity returns," said Ned McGuire, managing director and member of the investment management and research group at Wilshire Consulting. "November's 1 percentage point increase in funded ratio is the third consecutive and seventh monthly increase this year."
As measured by Northern Trust, the average funding ratio for S&P 500 companies with defined benefit plans increased to 85.7% in November from 84.6% the month before.
Global equity markets rose about 2.4% during the month and drove the change, while the discount rate increased slightly to 2.7% from 2.68% during the month.
"Despite continued equity market strength, few pension plans have been able to derisk this year as average funded ratios still remain below where they were at the beginning of the year," said Jessica Hart, head of the OCIO retirement practice at Northern Trust Asset Management, in a news release announcing the results.
"As plan sponsors look towards 2020," she said, "they will need to consider the implications of a continued low rate and potentially low return environment."
According to Mercer, the estimated aggregate funding ratio of defined benefit plans sponsored by S&P 1500 companies increased by 1 percentage point to 86% as of Nov. 30 because of an increase in equity markets and a slight increase — 0.02 percentage points — in discount rates to 3.1% in the month.
The estimated aggregate deficit of pension fund assets of S&P 1500 companies totaled $351 billion as of Nov. 30, down $20 billion from the end of October.
LGIMA found the funding ratio of a typical corporate pension plan rose by 0.9 percentage points to 81.1%, primarily driven by performance of global equities. LGIMA estimates Treasury rates increased by 5 basis points, while credit spreads tightened by 7 basis points, resulting in the average discount rate decreasing 2 basis points.
Liabilities for the typical plan increased 0.51%, while plan assets with a traditional 60% equity/40% bond asset allocation increased by roughly 1.78%, LGIMA said.
