Total-return allocated corporate pension plans outpaced LDI plans in April, as interest rates ticked up and equity markets tumbled, fueled by fears of persistent inflation and the continuing war in Ukraine. Credit spreads also widened and are near or above median levels, increasing pension discount rates and lowering liability valuations. Total-return plans with higher duration liabilities and lower fixed-income allocations may have experienced an increase in funded status despite equity market losses, while LDI-focused peers holding more long-dated bonds may have seen a decline in funded status. NEPC’s hypothetical open- and frozen-pension plans note a funded status gain of 4.5% for the total-return plan compared to the LDI-focused plan funded status, which fell by 1.3% in April.

The funded status of the total-return plan increased by 4.5% as equity losses were offset by declining liability values.

The funded status of the LDI-focused plan fell by 1.3%, with asset losses stemming from both equities and long-duration bonds offset by higher discount rates. The plan is 79% hedged as of April 30.

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