US Corporate Funded Ratio Slumps in October

Wilshire Consulting’s managing director calls the month’s 1.9 percentage point dip the ‘largest pull back’ since June 2016.

Corporate US pension plans saw a slip in their aggregate funded ratios in October, sliding to 89.6% from 91.5% at Sept. 30, according to Wilshire Consulting.

In what the advisory firm called “the worst percentage loss for the Wilshire 500 since September 2011,” assets lost 5.7% of their asset values, which were partially offset by a 3.7% decrease in liabilities. October was a brutal month for the markets, as the S&P 500 tumbled to the verge of a 10% decline, the definition of a correction.

“October’s 1.9 percentage point decrease in funding was the largest pull back since a 2.1% decline in June 2016 and brings the aggregate funded ratio back” under 90%, Ned McGuire, managing director and a member of the agency’s pension risk solutions group, said in a statement. “Despite the drop, the funding level is still 5.0 percentage points higher year-to-date,” he added.

The average US corporation allocates 32% of its portfolio to domestic equity, 24% to international equity, 24% to long duration fixed income, 16% to core fixed income, and 4% to real estate, Wilshire reports.

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Aggregate funding ratios are based on the FTSE Pension Liability index–intermediate, with service cost, benefit payments, and contributions in-line with Wilshire’s 2017 corporate funding study.

Source: Wilshire Consulting

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