ASPPA: November Improvement in DB Funded Status Sharper than October

December 15, 2020

ASPPA published a piece highlighting NEPC's 2020 November Pension Monitor.


The improvement in corporate pension plan funded status in November was sharper than that of October. In fact, says a report, it was a reversal of some results from the month before.

According to investment consulting firm NEPC, funded status improved for both total return plans and liability-driven investment (LDI) plans, and in grand style compared to October. In a dramatic reversal from the previous month, the funded status for LDI plans which slipped from September to October, improved more than did that of a typical pension plan.

Type of Pension Plan November Improvement in Funded Status October Improvement in Funded Status Percentage Point Change, October-November
Typical pension plan  2.6% 0.9% + 1.7 percentage points
LDI plan 3.8% - 0.2% + 4.0 percentage points

NEPC attributes the improvement of funded status of both types of plans in November to an increase in return-seeking assets. More specifically, it says that the typical plan’s funding improvement is due to a “robust performance” by equities, while the improvement for the LDI plan is due to equities as well as long-duration bonds.

NEPC also says that both types of plans experienced losses in investments in Treasury rates and in credit spreads. The typical plan improved in return-seeking assets by more than did the LDI plan; however, the losses the typical plan experienced in credit spreads also outstripped those of the LDI plan. 

NEPC’s bases its monthly pension funded status figures on the performance of two hypothetical plans it uses to gauge the impact of developments in markets, interest rates and credit spreads on pension plans.

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