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SOURCE BNY Mellon
Pension Plans, Endowments and Foundations Benefit from Equity Rally
NEW YORK, Jan. 7, 2014 /PRNewswire/ -- The funded status of the typical U.S. corporate pension plan in December 2013 improved 1.3 percentage points to 95.2 percent, the highest level since September 2008, as rising equity markets drove assets higher and rising interest rates lowered liabilities, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG).
Public defined plans, endowments and foundations benefited in December from the equity rally as well as their holdings in private equity, ISSG said.
For U.S. corporate plans, assets increased 0.8 percent and liabilities fell 0.6 percent, ISSG said. The decline in liabilities was due to an eight-basis-point increase in the Aa corporate discount rate to 4.93 percent. Plan liabilities are calculated using the yields of long-term investment grade bonds. Higher yields on these bonds result in lower liabilities.
"December capped off a strong year as the funded status of the typical U.S. corporate plan increased more than 18 percentage points in 2013," said Jeffrey B. Saef, managing director, BNY Mellon, and head of ISSG. "It was the best of all worlds as rising equities benefited the asset side, while the rising discount rate resulted in lower liabilities. These trends have encouraged a growing number of plan sponsors to reduce their exposure to market volatility."
On the public side, the typical defined benefit plan in December achieved excess return of 0.4 percent over its annualized 7.5 percent return target, ISSG said. Public plan assets must earn at least 0.6 percent each month to keep pace with the 7.5 percent annual target.
For endowments and foundations, the net return over spending and inflation was 0.7 percent as plan assets increased 1.1 percent. Endowments and foundations continue to be aided by the low-inflation environment, which makes it easier for them to achieve their goals, ISSG said.
Notes to Editors:
The BNY Mellon Investment Strategy and Solutions Group is a division of The Bank of New York Mellon.
BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.5 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of Sept. 30, 2013, BNY Mellon had $27.4 trillion in assets under custody and/or administration, and $1.5 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.
All information source BNY Mellon as of Sept. 30, 2013. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance. A BNY Mellon Company.
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