Market rebound helps to fuel first positive month of 2016 for corporate defined benefit plans
NEW YORK, April 19, 2016 – According to the BNY Mellon Institutional Scorecard, which is available for download, here, the funded status of typical U.S. corporate defined benefit (DB) plans increased by 1.5 percent in March, to 80.2 percent. The increase marks the first positive month of 2016, as the funded status of corporate DB plans had previously fallen every month since October, 2015.
Over the course of the month, assets returned 5.1 percent, and liabilities were up 3.1 percent. Corporate discount rates fell by 19 basis points, to 4.00 percent. Much of the gain in liabilities was due to tightening credit spreads, as Treasury yields remained mostly flat throughout the month. According to BNY Mellon estimates, the S&P pension deficit also fell by roughly $18 billion in March, to $423 billion.
Overall, corporate pension assets are up 3.2 percent year-to-date, but still down 0.9 percent over the last 12 months. Meanwhile, liabilities are up 7.5 percent year-to-date, and up 1.5 percent since March, 2015. The funded status of a typical corporate DB plans is now up roughly 4 percent off of their 2016 low, which occurred in mid-February.
Of the asset classes the scorecard tracks, almost all saw positive returns in March. Emerging Market Equities and Private Equities returned 13.2 and 10.3 percent, respectively. REITs returned 9.5 percent, and Small Cap Equities and Large Cap equities returned 8.0 and 6.8 percent, respectively. Hedge Fund returns remained flat in March, and were the only asset class not to see positive returns on the month.
“Many pundits are attributing the March rally to the Federal Reserve, who continues to remain on hold with respect to further rate hikes,” said Andrew Wozniak, head of BNY Mellon Fiduciary Solutions. “And now, after the Fed released their latest meeting minutes, the speculation among many investors is that rates will again be held steady in April, following the next Federal Open Market Committee meeting.”
In March, public DB plans and endowments & foundations both beat their return targets by 5 percent respectively which, for both, marks the first positive month since October 2015.
Typical public DB plans are now only 5 basis points behind their year-to-date return target, though they remain 9.5 percent behind their one-year return target. Assets have, in total, dropped by 2.0 percent over that time period.
Similarly, endowments & foundations are ahead of their year-to-date target by 59 basis points, and are 8.34 percent behind their 12 month return target.
Notes to Editors:
BNY Mellon Fiduciary Solutions is a division of The Bank of New York Mellon.
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of Dec. 31, 2015, BNY Mellon had $28.9 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.
All information source BNY Mellon as of December 31, 2015. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance.