U.S. corporate pension plan funding surpluses continued to rise in July, with estimates from three new reports reaching aggregate funding ratios of up to 105% and more.
Wilshire Advisors estimated the aggregate funding ratio of U.S. corporate plans jumped 2 percentage points during the month to 105.4% as of July 31.
The increase was driven by a combination of a rise in asset values and a drop in liability values, Wilshire said.
"July marked the fourth consecutive month of funded status increase, with six out of the seven months so far this year experiencing an increase. The FT Wilshire 5000 has seen positive returns for five consecutive months and is up nearly 20.5% year-to-date," said Ned McGuire, managing director at Wilshire, in a news release Thursday. "With a liability return of approximately 2.5% and an asset return of approximately 8.7% year-to-date, the estimated July month-end funded ratio for U.S. corporate pension plans reached 105.4%. This level is the highest since year-end 2007 when it was estimated at 107.8% before the Great Financial Crisis."
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 jumped to 104.9% as of July 31 from 103.5% a month earlier.
In its latest monthly Pension Solutions Monitor, LGIMA said the estimated average funding ratio rose due to a strong equity market during July, while liability values dropped.
The monitor cited the MSCI ACWI Total Gross index and the S&P 500 index gaining 3.7% and 3.2%, respectively, during the period. Also, the monitor estimates plan discount rates increased 5 basis points during July, with the Treasury component increasing 15 basis points and the credit component tightening by 10 basis points.
The Pension Solutions Monitor assumes a typical liability profile using a duration of 12 years and an asset allocation of 50% MSCI ACWI 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 106.9% as of July 31, up from 105% a month earlier. Insight's report echoed the other monthly reports in citing a growth in assets and accompanying fall in liabilities for the larger pension surplus.
According to Insight's estimate, the discount rate rose to 5.15% as of July 31 from 5.09% as of June 30.
