U.S. corporate pension funding changes were muted in July and aggregate ratios remain above 100%, according to four new reports.
Wilshire Advisors estimated the aggregate funding ratio of U.S. corporate plans reached 101.5% as of July 31, an increase of 0.1 percentage points above the 101.4% funding ratio estimated as of June 30.
"July's funded status showed a muted change due to nearly equivalent positive returns for both assets and liabilities. Corporate bond yields, which are used to value corporate pension liabilities, fell to their lowest level since the first quarter of 2024, driven by expectations of U.S. rate cuts from the Federal Reserve," said Ned McGuire, managing director at Wilshire, in an Aug. 2 news release.
"Despite the increase in liability value, most asset classes posted positive returns in July, led by fixed income due to falling Treasury yields and U.S. equities, which reached all-time highs in the first half of the month. As a result, the estimated aggregate funded ratio remained overfunded in July," he said.
The increase in July was attributed specifically to a 2.3 percentage point increase in asset values, mostly offset by a 2.2 percentage point increase in liability values.
Wilshire's assumed asset allocation is 32% long-duration fixed income, 28% core fixed income, 24% 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 declined to 109.5% as of July 31 from 109.9% a month earlier.
LGIMA's Pension Solutions Monitor cited the S&P 500 index and MSCI ACWI Total Gross index returning 1.6% and 1.2%, respectively, during the period. The positive performance was not enough to offset a rise in liabilities that the monitor said was the result of an estimated decrease in discount rates of 30 basis points in the month ended July 31, driven by the Treasury component falling 31 basis points and the credit component widening by 1 point.
The 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 slightly jumped to 114.9% at the end of July from 114.3% a month earlier.
Insight’s report said rising liabilities slightly offset strong investment returns. The manager estimated that asset values increased 3.0 percentage points during July, while liability values rose 2.5 percentage points. The ratio rising by 0.6 percentage points was due to rounding error.
Finally, Aon said its estimated S&P 500 aggregate pension funding ratio fell slightly to 100.8% as of July 31 from 100.9% as of June 30.
Aon said liability values rose more than asset values during the period, citing the decrease in the interest rates used to value pension liabilities to 5.14% as of July 31 from 5.36% a month earlier.
