{"id":1178,"date":"2019-11-14T21:29:00","date_gmt":"2019-11-15T02:29:00","guid":{"rendered":"https:\/\/www.nepc.com\/private-wealth\/newsroom\/pensions-investments-ldi-is-behind-improved-funding-of-corporate-db-plans-nepc-says\/"},"modified":"2021-11-02T19:09:34","modified_gmt":"2021-11-02T23:09:34","slug":"pensions-investments-ldi-is-behind-improved-funding-of-corporate-db-plans-nepc-says","status":"publish","type":"newsroom","link":"https:\/\/www.nepc.com\/private-wealth\/newsroom\/pensions-investments-ldi-is-behind-improved-funding-of-corporate-db-plans-nepc-says\/","title":{"rendered":"Pensions & Investments: LDI is Behind Improved Funding of Corporate DB Plans, NEPC Says"},"content":{"rendered":"
[vc_row][vc_column width=”1\/1″][vc_column_text]Pensions & Investments wrote an article featuring the recent Corporate Defined Benefit Plan Trends Survey. View the article on their site here. <\/a><\/p>\n

The funded status of corporate defined benefit plans has improved since 2017 despite increased costs and declining discount rates, results of a survey by investment consultant NEPC <\/a>said.<\/p>\n

NEPC’s survey <\/a>of 121 pension plans conducted in September revealed that about 60% of plans have a funded status greater than 90% in 2019, compared with 46% two years ago. These better-funded plans have embraced liability-driven investing, glidepaths and liability reduction strategies.<\/p>\n

About three-quarters of plans with a funded status above 90% have used LDI ,and two-thirds have 40% or less of their assets allocated to equity. Among plans that use LDI, 44% have an allocation of 51% or higher, compared with 37% and 9% in 2017 and 2011, respectively.<\/p>\n

“The correlation between strong funded status and the use of LDI illustrates that risk management in the form of LDI works to reduce funded status volatility in a declining interest rate environment,” Brad Smith, a partner in NEPC’s corporate defined benefit group, said in a news release. “While the use of LDI has remained consistent with prior years, we’ve found that the allocations to LDI have increased significantly over the past two years and are a key contributor to protecting funded status in this market environment.”<\/p>\n

The survey also showed that 84% of plan sponsors believe a recession is likely to occur in the next three years, with half of those respondents expecting it within 12 to 18 months.
\nMore than half of corporate plan sponsors (58%) are bearish on the stock market and believe discount rates may be the same or lower over the next 12 months (63%). When asked what they believe the biggest threat to their portfolios is, respondents are split among geopolitical tensions (30%), political uncertainty (29%), and Federal Reserve action (28%).<\/p>\n

One-third of respondents stated that they have a return assumption of 6% or less compared with 20% in 2017.
\nThe survey revealed that 62% of plans, including both open and closed plans, are still accruing future benefits. Respondents indicated 38% of plans are frozen, 34% are closed, and 28% are open.<\/p>\n

Due to growing costs and interest rate volatility, 23% of plans are unsure if they will stay open, vs. 12% from two years ago.[\/vc_column_text][\/vc_column][\/vc_row]\n<\/div>","protected":false},"excerpt":{"rendered":"

[vc_row][vc_column width=”1\/1″][vc_column_text]Pensions & Investments wrote an article featuring the recent Corporate Defined Benefit Plan Trends Survey. 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