June 09, 2016

Funded Status of U.S. Corporate Pensions Rises in May to 80.2 Percent, According to BNY Mellon Fiduciary Solutions' Monthly Institutional Scorecard

Modest asset growth outpaces liabilities for plan sponsors


NEW YORK, June 9, 2016 /PRNewswire/ -- According to the BNY Mellon Institutional Scorecard, which is available online here, the funded status of typical U.S. corporate defined benefit (DB) plans increased by 0.3 percent in May, up to 80.2 percent. Over the course of the month, assets grew by 0.5 percent, which outpaced the increase in liabilities—up only 0.1 percent in May.

Corporate discount rates in May remained at the same level as the previous month, yielding 3.91 percent, which helped to keep liabilities close to flat. On the year, assets are now up 4.9 percent, but that growth remains behind liabilities, up 9.2 percent for typical U.S. corporate DB plan sponsors.

According to BNY Mellon estimates, the S&P 500 pension deficit is estimated to have decreased by $6 billion in May, to $430 billion.

"The trend of asset growth being largely offset by liability growth continued again in May." said Andrew Wozniak, head of BNY Mellon Fiduciary Solutions. "Funded status is about 15% below the 2013 high, and lack of improvement of funding levels through capital markets and the sense of urgency created by PBGC premium changes are causing sponsors to consider formal funding policies despite the latest round of funding relief."       

In May, the typical public DB plan fell short of its target of excess returns over a 7.5 percent annual return by 0.2 percent. Typical public DB plans are now up 0.3 percent against their goal year-to-date, but remain 9.3 percent behind their 12 month target. May ended a two month streak of above-target returns for typical public DB plans.

Endowments & foundations beat their goal of real return in excess of inflation and 5 percent spending by 0.1 percent in May. Endowments & foundations are up 1.2 percent against their target year-to-date, but still 8.1 percent behind their 12 month return target, despite modest inflation over the past year. REITs were a factor in helping endowments & foundations achieve their return target in May, returning 0.7 percent.

Of the other asset classes the scorecard tracks, U.S. Small Cap and Large Cap Equities had a strong month, returning 2.3 and 1.8 percent, respectively. International equities did not fare as well, as emerging market equities were down 3.7 percent, and developed market equities were down 1.7 percent.

Credit markets saw mixed results in May as well, with High Yield bonds up 0.6 percent; Long Duration Fixed Income up 0.3 percent, and Global Fixed Income and Emerging Market Debt down 1.3 percent and 0.3 percent, respectively.

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 March 31, 2016, BNY Mellon had $29.1 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 http://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 March 31, 2016. 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.             

SOURCE BNY Mellon