Pension Indicator Updated for September 30, 2020

September Blues

By: Grant Guyuron, Senior Managing Director, Clearstead

July and August were fantastic months for plan sponsors with equity exposure. September served as a reality check. Markets reacted negatively to reduced odds for additional stimulus from the U.S. government and various regions of the world experienced a resurgence of COVID-19 cases. Given that equity market valuations looked stretched in late August, it was a perfect storm for market pullback. The U.S. Presidential election, COVID-19 cases, and corporate earnings will be in the spotlight in October/November.

The S&P 500 Index returned -3.5% in September while the MSCI ACWI ex USA Index (international stocks) returned -2.5%; emerging markets modestly outperformed developed markets. Bond returns were mostly negative as well, with the Bloomberg Barclays U.S. Aggregate Index returning -0.1% as corporate bond spreads widened modestly. Treasury bonds provided modestly positive returns in the month. The net effect is that many plan sponsors watched asset values decline. As seen in the charts below, plans invested for asset growth returned -2%, while LDI managed portfolios fared better, returning -0.8%. On the liability side, it was a relatively flat month as liabilities only increased modestly. With lower assets and flat to slightly higher liabilities, plan sponsors generally saw funded statuses drop.

We expect the weeks ahead to potentially be choppy in the equity, credit, and interest rate markets. Plan sponsors would do well to monitor portfolios and funded status closely and continue to be disciplined about rebalancing.

From all of us at Findley and Clearstead, we hope everyone and their families are safe and healthy. 

As always, thanks for reading, and drop us a comment on how we're doing.

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Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. Performance data represents past performance.  Past performance is not indicative of future results.

Year to Date Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
Frozen (for several years) -7.5% -5.2% -3.0% -1.3%
 Recently Frozen -9.2% -7.0% -4.8% -3.1%
 Ongoing Traditional -10.8% -8.6% -6.5% -4.8%
 Cash Balance -8.0% -5.8% -3.6% -1.8%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -2.1% -1.7% -1.4% -0.9%
 Recently Frozen -2.2% -1.8% -1.5% -1.0%
 Ongoing Traditional -2.3% -1.9% -1.6% -1.1%
 Cash Balance -2.1% -1.7% -1.4% -0.9%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -2.1% -0.8% 0.5% 0.6%
 Recently Frozen -3.5% -2.2% -1.0% -0.9%
 Ongoing Traditional
-4.8% -3.6% -2.4% -2.2%
 Cash Balance -2.5% -1.2% 0.0% 0.2%


Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31

Disclosure

FINDLEY

 

Findley is an independent consulting firm and trusted business partner. We help you make critical decisions about employee benefits, compensation, and change management to make sure your human resources strategy aligns with organizational objectives. We provide strategic counsel to help navigate the changing benefits landscape and successfully manage workforce issues.

 

 

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 Clearstead is a leading institutional and private client advisory firm.  We are relentless in providing superior solutions so clients can exceed their aspirations, and build stronger legacies for their families, their communities, and themselves.  We do so with our authentic, steadfast, and innovative employee and board-member owned firm of nearly 80 professionals who work to tackle complex investment, financial, tax, and governance needs of our institutional and private clients.