Driven by a second consecutive month of strong performances by global equities, the funded status of a typical U.S. corporate pension plan improved by 3.9 percentage points in April, according to monthly statistics published by BNY Mellon Asset Management.
Assets for a typical moderate risk portfolio increased 6.7%, outpacing the 1.4% gain in liabilities during the month. For the year to date, the funding ratio for the typical plan is now up 9.5 percentage points, as represented by the BNY Mellon Pension Liability Index.
“April’s continuation of the global equity market rebound that started in March brought the funded status of the typical U.S. corporate pension plan nearly back to levels that we last saw at the end of November 2008,” says Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. “In April, the yields on long corporate Aa bonds decreased slightly, contributing to the slight rise in liabilities. We have been expecting these yields, which were well over their historic levels, to begin declining at some point.”
“In April, the decline of more than 50 basis points in corporate spreads was accompanied by a rise in Treasury yields. We continue to be wary of narrowing corporate spreads, which have the potential to increase liabilities,” continues Peter Austin. “At that point, plans will need additional help from equities to protect their funded status; or they will need to be particularly astute in managing their exposure to liabilities through effective asset allocation.”
L.D.