NEPC’s monthly pension funded status monitor tracks the funded status of two hypothetical plans to gauge the impact of movements in markets, interest rates, and credit spreads on pension plans.
In January, the funded status of a typical corporate pension plan rose as increasing discount rates overrode a small pullback in equity markets. Total-return plans outpaced LDI-focused plans that hedge interest-rate risk. While spreads remained largely flat for the month, the Treasury curve steepened reducing estimated liabilities. Based on NEPC's hypothetical open- and frozen-pension plans, the funded status of the total-return plan increased by 2.3%, while the LDI-focused plan saw an increase of 0.2%.
The funded status of the total-return plan increased 2.3%, driven by a decrease in liabilities which offset losses from equities.
The funded status of the LDI-focused plan increased by just 0.2% due to having hedged most of its exposure to interest rates. The plan is 82% hedged, as of January 31.