Falling interest rates precipitated by geopolitical tensions led to higher liabilities and a lower funded status for the typical U.S. corporate pension plan in August.
According to the BNY Mellon Investment Strategy and Solutions Group (ISSG), the funded status of the typical U.S. corporate pension plan in August fell 0.7 percentage points to 90.1% as liabilities rose 3.3%, outpacing the 2.6% return for assets.
This funded status is now down 5.1 percentage points from the December 2013 high of 95.2%.
“Investors appeared to be torn between concerns about increased geopolitical tensions and optimism about the U.S. economy,” says Andrew D. Wozniak, head of fiduciary solutions with ISSG. “Geopolitical concerns resulted in more interest in longer-term corporate credit and government bonds, sending interest rates lower. Optimism about the economy helped to push equities and other risk-based assets higher.”
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