The funding ratio of the typical corporate pension plan rose by about 3 percentage points to 95 percent in the fourth quarter of 2013, according to the UBS Global Asset Management US Pension Fund Fitness Tracker.
Overall, 2013 was a very strong year for corporate pension plans, with the average funding ratio rising by about 17 percentage points due to strong investment returns of 4.7 percent, UBS found.
The U.S. equity market finished the year with a major upswing, with the S&P 500 Index recording a 10.5 percent total return over the quarter. UBS also found that the prospect of a U.S. default had virtually no impact on the equity markets, which continued to rise once a bargain was struck.
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The fourth quarter was dominated by investors' bets on when the Federal Reserve would begin scaling back its bond-buying program. The yield on 10-year Treasury bonds increased 42 basis points, ending at 3.03 percent. The yield on 30-year Treasury bonds increased 29 basis points, ending at 3.97 percent, UBS said. High-quality corporate bond credit spreads ended the quarter 27 basis points tighter. As a result, pension discount rates, which are based on the yield of high-quality investment grade corporate bonds, were flat.
Liabilities for the typical pension plan increased by about 1 percentage point over the quarter.
UBS Global Asset Management is a large-scale asset manager that offers investment capabilities and styles across all major traditional and alternative asset classes including equities, fixed income, currencies, hedge funds, real estate, infrastructure and private equity that can also be combined into multi-asset strategies.
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