December was not a good month, neither for U.S. corporate nor public pension plans, foundations nor endowments.
According to the BNY Mellon Investment Strategy and Solutions Group, all finished the year on a down note, with falling assets and rising liabilities.
While ISSG didn't find corporate plans' funded status quite as bad as Towers Watson determined in its own analysis (the Towers Watson analysis calculated that corporate plans in aggregate were funded at only 80 percent), the news isn't cheery by any means.
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The BNY Mellon Institutional Scorecard reported that, for the typical corporate plan in December, assets decreased 0.4 percent as liabilities increased 2.5 percent.
The scorecard said that the typical corporate plan's funded status dropped by 7.9 percent from the December 2013 high of 95.2 percent.
The fall in assets in both corporate and public plans was a result of drooping international and emerging markets equities, while foundations and endowments suffered negative returns thanks to declines in private equity and commodities, according to ISSG.
Higher liabilities for corporate plans came about because of a 14-basis-point drop in the Aa corporate discount rate to 4 percent during December. With plan liabilities calculated on the basis of long-term investment grade bond yield, lower yields bring higher liabilities.
"The decline in interest rates, with the Aa corporate discount rate falling 93 basis points during the year, was the main driver for the fall in funded status during 2014," said Andrew D. Wozniak, head of fiduciary solutions, ISSG.
He continued, "Asset gains simply could not keep up with the rise in liabilities. The falling rates of 2014 erased almost all of the gains in funded status in 2013 that resulted from rising interest rates during that year."
ISSG said that in December, public defined benefit plans underperformed their targets by 1.8 percent, with a decline of 1.2 percent in assets. For the full year, public plans underperformed by 3.0 percent.
Endowments and foundations suffered a real return in December of negative 1.8 percent, as assets fell by 1.4 percent, ISSG said.
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