U.S. corporate pension plans focused on hedging interest rate risk experienced modest gains in funded status in the second quarter. With Treasury yields falling over the quarter, plan liabilities increased, likely outpacing gains from the robust equity market for plans focused on a total-return asset policy. During the second quarter, the funded status of a total-return plan declined by 1.9%, underperforming the LDI-focused plan which improved by 2.0%.
The funded status of the total-return plan declined over the quarter as falling Treasury rates pushed liabilities higher. This plan has a higher duration of liabilities and is more sensitive to interest-rate movements on the long end of the curve.
The LDI-focused plan saw an increase in funded status over the quarter mainly from gains in risk assets. The plan is 87% hedged as of June 30.