U.S. corporate pension fund surpluses remained high in April despite negative market returns for the month, according to three new reports.
Wilshire Advisors estimated the aggregate funding ratio of U.S. corporate plans reached 110.8% as of April 30, an increase of 1.1 percentage points above the 109.7% funding ratio estimated as of March 31.
"April’s funded status increase resulted from the increase in Treasury yields, which led to the largest monthly decline in liability values since September 2022. Corporate bond yields, used to value corporate pension liabilities, are estimated to have increased by over 45 basis points," said Ned McGuire, managing director at Wilshire, in a May 7 news release.
"Despite most asset classes experiencing negative returns during the month with the FT Wilshire 5000 Index posting its worst monthly performance since September 2023 and ending five consecutive months of gains, the aggregate funded ratio is estimated to have increased due to the liability value decrease. April’s month-end funded ratio estimate of 110.8% remains at its highest in decades,” said McGuire.
The increase for March was specifically attributed to a 5.2-percentage-point drop in liability values, partially offset by 4.2-percentage-point drop in asset values. The total increase of 1.1 percentage point was due to rounding.
Wilshire's assumed asset allocation is 31% long-duration fixed income, 28% core fixed income, 25% domestic equity, 14% international equity and 2% real estate.
Legal & General Investment Management America estimated the average funding ratio of the typical U.S. corporate pension plan fell to 107.6% as of April 30 from 108.2% a month earlier.
In its latest monthly Pension Solutions Monitor, LGIMA said the estimated average funding ratio fell due to negative returns in April, which offset lower liability values.
The monitor cited the S&P 500 index and MSCI ACWI Total Gross index losing 4.1% and 3.2%, respectively, during the period. Also, the monitor estimated that plan discount rates increased 45 basis points during April, with the Treasury component increasing by 46 basis points and the credit component tightening by 1 basis point.
The Pension Solutions Monitor assumes a typical liability profile using a duration of 12 years and an asset allocation of 50% MSCI ACWI index and 50% Bloomberg U.S. Long Government/Credit index.
In another monthly report, Insight Investment said the funding ratio for U.S. corporate pension plans increased to 113.5% at the end of April, up from 112.2% a month earlier.
Insight's report said liabilities dropped enough to offset negative returns for the month. The manager estimated liabilities returned -5.5% for the month, reflecting a 45-basis-point rise in discount rates, while asset values returned -4.4%.
