Private Equity Leads the Way in Pension Plan Returns
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Private Equity Leads the Way in Pension Plan Returns

bny mellon nfRising equity values in the US and international markets has lifted the funded status of typical US corporate pension plans 2.9 percentage points to 91 percent in September, the first time they have topped that level since June 2011, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG).

For September, the rise in equities contributed to a 3.1 percent increase in assets for the typical US corporate pension plan.

Private equity, which comprises 10 percent of the typical public defined benefit plan, was one of the best performing asset classes in September, returning 9 percent.

“Rising above a funded status level of 90 percent is important to many corporate pension plans as they are more likely to implement strategies that can lower a plan’s exposure to market volatility,” said Jeffrey Saef, managing director, BNY Mellon Investment Management, and head of the ISSG. “The recent equity market returns are helping corporations outperform their liabilities.”

On the public side, the typical defined benefit plan in September posted a 3.4 percent excess return over its annualized 7.5 percent return target. Public plan assets must earn at least 0.6 percent each month to keep pace with the 7.5 percent annual target. For the month, assets of the typical public plan outperformed those of corporate pension plans and foundations and endowments as a result of the public plan allocations to private equity. Year to date, public plan assets are ahead of the return target by 3.8 percent.

For endowments and foundations, the net return over spending and inflation was 2.6 percent as plan assets increased 3.3 percent. Over the past 12 months, plan assets are up 10.7 percent beating the spending and inflation target by 4.4 percent.

© 2013 PEPD • Private Equity’s Leading News Magazine • 10-3-13

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