The funded status of U.S. corporate pensions fell during the month of July, according to two different sources, with increasing liabilities pushing them down.
The BNY Mellon Investment Strategy and Solutions Group (ISSG) said that the typical U.S. corporate pension plan fell by 1.1 percent to 86.7 percent for the month, while Wilshire Consulting noted a 70-basis-point drop in the aggregate funding ratio that brought plans to 86.1 percent—exactly the same as Wilshire noted it was in July of 2014.
Wilshire said that liabilities rose by 1.8 percent, while asset values only gained a single percent.
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According to ISSG, the liability increase for the typical U.S. corporate plan was 2.3 percent. The increase resulted, it added, primarily by Aa corporate discount rates, which fell 14 basis points over the month to 4.36 percent.
Corporate defined benefit plans gained 1.07 percent, thanks in large part to its 29 percent allocation to U.S. large-cap equities (which returned 2.1 percent) and a 26 percent allocation to long-duration bonds (which brought in 2.2 percent).
Public DB plans met their return targets in July, ISSG said, but added that this is only the second month this year in which the typical DB plan met or exceeded returns. As a result, public plans are lagging on year-to-date return targets of 4.3 percent, and are trailing their annual return target.
Endowments and foundations weren't so lucky, ISSG added, pointing out that real return for them was on the wrong side of the balance sheet at -0.6 percent. That was due to the drop in commodity prices and poor performance by emerging market equities.
The asset class with the best performance, according to BNY Mellon, was the REIT, with a July return of 4 percent. Those poorly performing emerging market equities came in at the other end of the spectrum, at -6.9 percent.
Wilshire bases its estimates on the combined assets and liabilities of companies in the S&P 500 index that have DB plans, and estimates allocations as follows: domestic equity, 32 percent; long-duration fixed income, 27 percent; international equity, 21 percent; core fixed income, 18 percent; and real estate, 2 percent.
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