Corporate pension plans posted moderately positive results in February despite market turmoil fueled by Russia’s invasion of Ukraine and speculation around the number of rate hikes by the Federal Reserve to fight inflation. Interest rates inched up while spreads widened significantly back to 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 compared to LDI-focused peers holding more long-dated bonds. The funded status of the total-return plan was up 2%, while the LDI-focused plan rose 0.2% in February, according to NEPC’s hypothetical open- and frozen-pension plans.
The funded status of the total-return plan increased by 2.0% as equity losses were offset by declining liability values.
The funded status of the LDI-focused plan gained 0.2%, with asset losses stemming from both equities and long-duration bonds offset by higher discount rates. The plan is 77% hedged as of February 28.