Pension Indicator Updated for November 30, 2020

A November to Remember

By: Grant Guyuron, Senior Managing Director, Clearstead

Markets expressed angst leading up to the U.S. presidential election in November, with the VIX (implied market volatility) trading at elevated levels relative to historical averages. The market tends to dislike uncertainty, and though polls were pretty heavily favoring Joe Biden to win the election, polls have been wrong in the past and how long it might take to determine the winner was also unknown. Additionally, there was uncertainty regarding which party would hold a majority in the Senate (and the Georgia elections are still pending). Since the outcome of the election has come more into focus, market volatility has declined, and risk assets have rallied.

In November, the S&P 500 Index (U.S. large cap stocks) returned 10.1%, the Russell 2000 Index (U.S. small cap stocks) returned 18.4%, and the MSCI ACWI ex USA Index (international stocks) returned 13.5%. The Russell 2000 Index return was the best monthly return for the index on record1. Bond returns were positive as well, with the Bloomberg Barclays U.S. Aggregate Index returning 1.0% and the Barclays Long Government Credit 3.5%, as corporate bond spreads narrowed. Higher risk fixed income assets such as U.S. corporate high yield (Bloomberg Barclays U.S. Corporate High Yield Index) and emerging market debt (JP Morgan EMBI Global Diversified Index) were up 4.0% and 3.7%, respectively, in November. The net effect is that many plan sponsors watched asset values appreciate considerably. As seen in the charts below, plans invested for asset growth returned 8.1%, while LDI light portfolios also performed well, returning 6.6%. Liabilities were also generally higher in the month, with older frozen and cash balance plans up 2.6% - 2.8%. More recently frozen plans and those with ongoing benefit accruals experienced liability increases of 4.1% and 5.5%, respectively. Plans with more of a growth orientation that have been frozen for a while may have experienced an increase in funded status of >5% in the month.

Given the recent improvement many plan sponsors have seen in funded status, it is advisable to consider their glide path positions and be disciplined about raising cash for ongoing expenses and benefit payments.

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.

1Source: Bloomberg

Year to Date Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
Frozen (for several years) -2.9% -1.5% 0.3% 1.5%
 Recently Frozen -5.6% -4.2% -2.4% -1.3%
 Ongoing Traditional -8.0% -6.7% -4.9% -3.9%
 Cash Balance -3.5% -2.1% -0.3% 0.8%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 5.3% 4.2% 3.8% 2.9%
 Recently Frozen 3.7% 2.7% 2.2% 1.3%
 Ongoing Traditional 2.2% 1.2% 0.7% -0.2%
 Cash Balance 5.1% 4.0% 3.6% 2.6%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -0.1% 0.7% 2.0% 2.3%
 Recently Frozen -2.4% -1.6% -0.3% -0.1%
 Ongoing Traditional
-4.5% -3.7% -2.5% -2.2%
 Cash Balance -0.7% 0.2% 1.4% 1.7%


Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31

Disclosure