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U.S. Corporate Pensions, Endowments and Foundations Miss March Funding Targets

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U.S. corporate pension plans, endowments and foundations missed their funded status targets in March, according to BNY Mellon Investment Strategy and Solutions Group.

The BNY Mellon Institutional Scorecard, released Monday, showed that public plans fell by 0.4 percentage points in March to 87.2%, as most equity categories lost value.

The typical U.S. corporate plan’s assets contracted by 0.5% in March, while liabilities fell 0.1% as the Aa corporate discount rate rose two basis points to 3.86%.

ISSG noted in a statement that plan liabilities are calculated by using the yields of long-term investment grade bonds. Higher yields result in lower liabilities.

The funded status in March was 4.9 percentage points lower than in March 2014, and was 0.1 percentage points lower than at the start of 2015.

Public defined benefit plans missed their March return target by 1.3% as assets returned a negative 0.7%. Year over year, these pension plans were below their return target by 2.7%, ISSG said.

The real return for endowments and foundations in March was -1.1%, as assets returned -0.9%, according to the report.  Endowments and foundations were 2% behind their inflation-plus spending target year over year, ISSG said.

“March was a lackluster month for most markets, with little fluctuation in asset values,” Andrew Wozniak, head of fiduciary solutions at ISSG, said in the statement. “However, volatility increased as investors anticipate a shift in U.S. monetary policy.

“Higher rates would reduce liabilities, although investors would have to decide where to allocate assets so they are best positioned in the new interest rate environment.”

— Check out Bloomberg Philanthropies Pushes Governments to Drive Change on ThinkAdvisor.